0808

Rewarded with a smile by exceeding your expectations

Annual Report 2011

Year ended March 31, 2011

TOYOTA MOTOR CORPORATION 0729

Leading the way to the future of mobility

A future mobility that links people with products and services

Toyota's Global Vision not only calls for building better cars, but also expresses our goal of contributing to the creation of better communities. Toyota is developing new products and services for the future of mobility, with the goal of realizing practical, low-carbon mobility; new lifestyles; broad application of environmental technologies and infrastructure for safer mobility.

Fruit Fruit Ever-better cars Enriching lives of communities Develop vehicles that Contribute to communities exceed expectations Contribute to the future of mobility Sustainable growth Constantly strive for the "ever-better cars" and "enriching lives of communities" goals by ensuring sustainable profitability with a long-term point of view.

Trunk Stable business base

Roots Toyota values The Toyoda Precepts Guiding Principles at Toyota The Toyota Way

Tomorrow's environment-friendly vehicles, new business activities

2 0729 Meeting challenging goals by engaging talents and passion

Building cars that meet the needs of people in every region

Toyota seeks to build ever-better cars that Percentage of Sales by Market meet the needs of consumers and society, based on our principles of “customer-

first,” “genchi genbutsu” (onsite, hands- Emerging 2010 Industrialized Emerging 2015 Industrialized markets Sales nations markets Sales nations on experience) and “good quality, 40% performance 60% 50% plan 50% affordable price.” We seek to realize this goal by cultivating global personnel who maintain the spirit of Toyota’s culture of Achieve equal weightings in unit sales between industrialized nations and emerging markets craftsmanship (monozukuri ) and skill proficiency. Manufacturing and Sales Strategies

3 0819

Constantly innovating to create new value

Exceeding expectations and making an impression

We aim to work as hard as we can to exceed expectations. To that end, we seek not only to incorporate leading- edge technologies, but also to create new value in vehicles in such areas as design, high-tech communications and quality, so that people can see, touch and feel that value when using our products. Our goal is to build cars that impress by being one step ahead in innovation. Product Development Strategies

4 0819 Moving people in the safest and most responsible ways

Unending pursuit of integrated safety

Toyota takes an integrated approach combining safe vehicle development, traffic-safety awareness and the creation of a safe traffic environment based on our guiding principle of always providing safe products, so that riding in our vehicles will bring smiles . By offering safety and quality that exceed expectations, we are contributing to achieving the goal of next-generation mobility: zero traffic fatalities.

Three-Pronged Integrated Approach

People

Traffic Vehicles Environment

Special feature: Toyota’s Safety Technology

5 0810

Contents

Toyota Digest: The Way Forward 2011 Highlights Message / Vision Message from the President 7 Chairman’s Message The President thanks our customers for support during a challenging environment, announcing our Global Vision efforts and our 8 President’s Message aim to be “A Company Selected By Customers.” Human life is our top priority, so relief and regional recovery came first in the 9 TOYOTA Global Vision aftermath of the earthquake. Next, we set about restarting production, deploying the awesome power of superior “on-the-spot” efforts for rapid production normalization. We are holding our course toward sustained growth amidst challenging circumstances. Special Feature: Toyota’s Safety Technology Toyota Global Vision Business and Performance Review Our new vision clarifies the kind of company Toyota seeks to be and our course for realizing a “regional initiative” structure for 18 Consolidated Performance Highlights sustained growth. We aim for coexistence and co-prosperity with customers and society by building better cars and creating good 20 Automotive Operations communities and a good society, providing earnings for a stable business/earnings foundation (consolidated operating margin 5% 21 Restore and Renew Our Production Structure for Further Growth on unit sales of 7.5 million, ¥85/US$1 (operating income approx. ¥1 trillion) and nonconsolidated operating income profitability). 22 Financial Services Operations 23 Other Business Operations Special Feature: Toyota’s Safety Technology 25 New Business Activities Toyota seeks to offer products that exceed customer expectations for safety and quality, and is working to contribute 26 Support for Recovery from the Great East Japan Earthquake to achieving zero traffic injuries and fatalities, which is the ultimate goal of the mobility society. We introduce the three perspectives we take in striving to provide the world’s highest level of safety: Our basic safe philosophy, the leading-edge Management and Corporate Information technologies we employ to achieve safer vehicles, and future direction of safety technologies. 27 R&D and Intellectual Property 29 Corporate Philosophy New Business: Toyota’s Smart Grid Efforts 30 Management Team Realizing the “future mobility society” conceived in our new vision requires the broad acceptance of next-generation 32 Corporate Governance environmentally-friendly vehicles. We introduce the smart grids that will provide the infrastructure to make this possible, giving 35 Risk Factors an outline of the overall concept and discussing the trials that will lead to their realization and ties with other companies, such 38 Other Management and Corporate Data as Microsoft, that will speed up the process. Financial Section and Investor Information New Management Structure 39 Message from the Executive Vice President Responsible for Accounting We revamped our management structure on April 1, 2011, so as to achieve our new vision. We introduce structures for 41 Selected Financial Summary (U.S. GAAP) making prompt management decisions based on onsite information and customer opinions and creating a structure for 43 Consolidated Segment Information management that is closely attuned to what is happening at actual sites. 44 Consolidated Quarterly Financial Summary 45 Management’s Discussion and Analysis of Financial Condition and Results of Operations Outline of Results and Future Prospects: Message from the Executive Vice President Responsible for Accounting 70 Consolidated Financial Statements During the fiscal 2011 we bounced back from challenging circumstances to produce results showing improved earnings 75 Notes to Consolidated Financial Statements and profits. We will continue toward the goal set forth in our Global Vision of building consistent, solid profitability in 110 Management’s Annual Report on Internal Control over Financial Reporting nonconsolidated operating income, with a consolidated operating margin of 5% and operating income of around ¥1 trillion, 111 Report of Independent Registered Public Accounting Firm even under such severe conditions as an exchange rate of ¥85/US$1 and consolidated unit sales of 7.5 million. 112 Investor Information

Click any title to link to that section

Cautionary Statement with Respect to Forward-Looking Statements Toyota operates that affect Toyota’s automotive operations, particularly laws, regulations and government policies relating to vehicle safety including remedial measures such as recalls, trade, environmental protection, vehicle emissions and vehicle fuel economy, as well as changes in laws, regulations and government policies that affect Toyota’s This document contains forward-looking statements that reflect Toyota’s plans and expectations. These forward-looking statements are not guarantees of future performance other operations, including the outcome of current and future litigation and other legal proceedings government proceedings and investigations; (vi) political instability in the and involve known and unknown risks, uncertainties and other factors that may cause Toyota’s actual results, performance, achievements or financial position to be materially markets in which Toyota operates; (vii) Toyota’s ability to timely develop and achieve market acceptance of new products that meet customer demand; (viii) any damage to different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. These factors include: (i) Toyota’s brand image; and (ix) fuel shortages or interruptions in transportation systems, labor strikes, work stoppages or other interruptions to, or difficulties in, the employment changes in economic conditions and market demand affecting, and the competitive environment in, the automotive markets in Japan, North America, Europe, Asia and other of labor in the major markets where Toyota purchases materials, components and supplies for the production of its products or where its products are produced, distributed markets in which Toyota operates; (ii) fluctuations in currency exchange rates, particularly with respect to the value of the Japanese yen, the U.S. dollar, the Euro, the or sold; and (x) the impact of the March 11, 2011 Great East Japan Earthquake and ensuing events, including the negative effect on Toyota’s vehicle production and sales. Australian dollar, the Canadian dollar and the British pound; (iii) changes in funding environment in financial markets; (iv) Toyota’s ability to realize production efficiencies and A discussion of these and other factors which may affect Toyota’s actual results, performance, achievements or financial position is contained in Toyota’s annual report on to implement capital expenditures at the levels and times planned by management; (v) changes in the laws, regulations and government policies in the markets in which Form 20-F, which is on file with the United States Securities and Exchange Commission.

TOYOTA ANNUAL REPORT 2011 6 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Chairman’s Message President’s Message Chairman’s Message Toyota Global Vision

I would like to start by offering sincere condolences on behalf of For Toyota, 2010 was a year in which a series of quality issues everyone at Toyota to those who have faced great hardship due to spurred us to return to our roots and to work on restoring trust by the Great East Japan Earthquake. rebuilding relationships with our customers, dealers and suppliers. In There are currently a number of measures being undertaken for returning to the spirit of manufacturing and car building that Toyota post-disaster revival, and we believe that we must give our all in has embraced since its founding and aiming to realize an even higher contributing to the revival of the automobile industry and the manufac- level of safety and security from the standpoint of our customers, we turing sector as a whole. For Toyota, this means that now, more than have placed increasing emphasis on being on the spot and are now ever, we must remain strongly aware of our founding principle of even more focused on building ever-better automobiles. We are contributing to society through the production of automobiles and continuing to enhance our thorough quality assurance and quality that we must put to use the experience that has enabled us to meet control systems on a global level. the challenges of enormous changes in the past. We will continue to strengthen these efforts, aiming to realize The recent disaster has highlighted not only for Japan but also for continuous growth through the thorough application of our principles the whole world the important role of northeastern Japan and northern of “customer-first,” genchi“ genbutsu (onsite, hands-on experience)” Kanto in Japan’s component manufacturing industry. I believe that all and “good quality, affordable price.” We will also employ innovation of us must work together to find the path to recovery and revival, so based on knowledge and continuous improvement to earn the that the stricken regions can continue to be a base of manufacturing satisfaction of our customers and to contribute to the kind of future and that the Japanese manufacturing sector can continue to develop. mobility that the world needs. One of Toyota’s strengths lies in our focus on the power of the In closing, I would like to thank all of our stakeholders for their workplace, which is now underpinned by our sense of crisis and ongoing understanding and support. sense of mission. Toyota’s top management is continually observing the workplace, aiming to create a shared understanding with those July 2011 onsite that there is no limit to human capacity and ingenuity as we seek solutions that bring us closer, one step at a time, to recovery and revival. Fujio Cho, Chairman

TOYOTA ANNUAL REPORT 2011 7 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Chairman’s Message President’s Message President’s Message Toyota Global Vision

I would like to begin by offering thanks for the continued support and Thanks to these tremendous frontline efforts, the work to get understanding of all of our stakeholders. In addition, on behalf of production back to normal proceeded at a feverish pitch. After a everyone at Toyota I would like to express my wishes for the restful short delay, we were able to announce our financial, production, and peace of all those we lost to the Great East Japan Earthquake, and to sales forecasts in June. offer our sincerest sympathies to all who have suffered through this When we announced our Global Vision, we noted the need to great tragedy. quickly establish a revenue base that provides operating income of When I reflect on the past year, I am touched by the support around ¥1 trillion, even with an exchange rate of ¥85 to the U.S. dollar offered by so many of our customers and stakeholders as we dealt and sales of 7.5 million units. With our breakeven point now more with the ongoing effects of the global financial crisis, as well as than 1 million vehicles lower compared to what it was at the time of product quality and safety issues. I offer my sincerest gratitude. our worst reported loss, we are now on pace to reach that income Learning from these experiences, I continued to ask myself, target despite the effects of the disaster. Compared with our past “What kind of company do we want Toyota to be? What kind of earnings of more than ¥2 trillion, this goal may seem insufficient. company should Toyota be?” I realized that Toyota should strive to be However, I believe that being able to make a steady profit while a company that people choose, and that people are happy to have meeting all tax obligations—no matter the economic situation—is chosen. The Global Vision we announced in March is strongly imbued more meaningful than making a lot of money during the good times. with these ideas. I believe that the shareholders who keep their shares even during The Great East Japan Earthquake struck two days after we a difficult business environment are the ones who understand and announced our Global Vision. Our employees entered the stricken truly support Toyota. I want to meet the expectations of those areas in the immediate aftermath of the earthquake and began shareholders, so the course I am charting is one that I strongly believe providing support, working together with local residents to reconstruct will lead to continuous growth. and restore communities. Upon viewing the situation after the disaster, Toyota will continue to work to be a company that exceeds the our support teams assessed the situation, quickly worked out what expectations of all our stakeholders and brings smiles to the faces of was best for the communities and immediately set about their tasks our customers. We ask for your continued support of our efforts. accordingly. This represents the very spirit of Toyota’s “power of the workplace”—an asset built up and handed down through 70 years of July 2011 Toyota history. Priority was given to rescuing and preserving life, then to the restoration of the communities, with restarting production only considered after the situation stabilized. Akio Toyoda, President

TOYOTA ANNUAL REPORT 2011 8 0804 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Chairman’s Message President’s Message Toyota Global Vision Toyota Global Vision

Exceeding Expectations to Achieve Growth Toyota Global Vision Goals of Our Vision Regional entities to drive further evolution of “Customer First” and “genchi genbutsu”

Toyota has engaged in a variety of management reforms in response to the industry environment. The Toyota Global Vision offers automobile This Global Vision calls for management at Our new Global Vision clarifies the corporate image and values for which we aim. Our goal is to manufacturing that exceeds customer expectations the head office to determine our overall direction achieve future growth based on the lessons we have learned and our reflection on our experiences and a new mobility society based on the Toyota and conduct regional support, whereas the associated with the deterioration of the management environment caused by the Lehman shock Precepts, the Toyota Guiding Principles and the regional entities around the world, which are and a series of quality issues. Henceforth, we will establish posts in each region of the world Toyota Way, which have been the guiding aim closest to their customers, make independent based on this vision and achieve continuous growth through a structure composed of regional of our spirit of manufacturing (monozukuri ) decisions. What this means is realizing “Customer entities that conduct our actual business. throughout our 74-year history. By building a First” and “genchi genbutsu.” This concept stable management foundation from revenues represents a change in the management structure gained through coexistence and co-prosperity aimed at rapid feedback from actual locations with society and our customers, as well as by and using that feedback in decision making, while Toyota Global Vision contributing to the development of local always being able to ensure that such decisions communities, we can create a virtuous cycle for are acceptable to society. continuous growth.

Toyota will lead the way to the future of mobility, Fruit Fruit enriching lives around the world with the safest Ever-better cars Enriching lives of communities Develop vehicles that Contribute to communities and most responsible ways of moving people. exceed expectations Contribute to the future of mobility Sustainable growth Through our commitment to quality, Constantly strive for the "ever-better cars" and "enriching lives of communities" constant innovation and respect for the planet, goals by ensuring sustainable profitability with a long-term point of view. Trunk we aim to exceed expectations Stable business base and be rewarded with a smile. Roots Toyota values We will meet challenging goals by engaging The Toyoda Precepts Guiding Principles at Toyota The Toyota Way the talent and passion of people, Toyota’s Visionary Management who believe there is always a better way. Toyota’s Visionary Management concept can be expressed using the metaphor of a tree. The roots of the tree are the shared values that underlie our spirit of monozukuri. The fruit of the tree is our contributions to “always making better cars” and “enriching the lives of communities.” The trunk of the tree is a stable business foundation that supports products that please our customers. Henceforth, we will conduct our business so as to achieve continuous growth through a virtuous cycle comprising these three elements.

TOYOTA ANNUAL REPORT 2011 9 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Chairman’s Message President’s Message Toyota Global Vision Toyota Global Vision

Ensuring the realization of Our Vision

Building a strong revenue base and altering the management structure Strategies and important efforts by region

For the steady execution of a business strategy affiliates, using external experts to gain feedback Japan China, emerging markets, Others based on our regional entities, we will strengthen from outside the company and establishing the In Japan, we are engaged in the highly Our efforts in China and other emerging markets the three core functions of quality maximization, Executive General Manager position to promote technologically advanced and improved include improving our brand image and working cost minimization and human resources local management. manufacturing that Japanese customers expect. to introduce environment-friendly vehicles and development, while establishing a solid business As a result, even in a tough business This includes offering vehicles such as high- otherwise diversify mobility in these countries, foundation that balances quality and cost. The environment in which we are contending with an value-added hybrids and Lexus models, as well especially China. In Asia and Oceania, we will management structure has been altered so as to exchange rate in the range of US$1/¥85 and as three-row minivans and mini-vehicles, so as to continuously release products that meet the achieve early realization of these goals. Our vehicle sales of 7.5 million units, we are building a provide products that will satisfy our customers. needs of emerging markets, such as international efforts to transfer authority from the head office to firm management structure through which we can multipurpose vehicles (IMVs) and newly regional entities and achieve efficient business soon achieve a consolidated operating margin of North America developed compact cars, moving forward with a management at the local level include reducing 5%, operating income of around ¥1 trillion and a We are promoting further autonomy on the part of supply strategy that is responsive to expanding the number of directors, cutting away some layers return to profitability in non-consolidated operating our North American entities by making that region markets within and outside the region. We will of decision making, stationing Regional Chief income. our global center for models such as the Camry, cultivate this region as a global base for efficient Officers for localized decision making by overseas as well as by aiming to build a consolidated development and production through greater structure in North America that covers everything localization and improved productivity. Sales profit rate: from development through production and supply Furthermore, in the Middle East, Africa and Latin Toyota and Lexus unit sales 5% (approx. ¥1 trillion) to other countries. Furthermore, we linked up in America we will seek to provide the cars that 7.29 million units 7.56 million units Sustainable May of last year with Tesla Motors in an effort to customers in each region demand, that is, those ¥468.2 billion 7.5 million units growth Consolidated operating income (precondition) create the future mobility society through joint that customers in each country will call “my car.” ¥147.5 billion efforts in advanced IT technologies and IT FY Ended FY Ended Achieve as soon 2015 industry. Promoting management led by regional entities March 31, 2010 March 31, 2011 as possible $1=¥93 $1=¥86 $1=¥85 1€=¥131 1€=¥113 1€=¥110 Europe Establish Stable Business Base Pursue Growth Strategy We are sharpening our technological abilities for Global Vision success in this fiercely competitive market with its Expectations mature automotive culture. At the same time, we are focusing our global product planning efforts Regional missions in the region. Our goal is to establish a powerful Role to play and issues to address in brand in Europe by building attractive cars and support of fulfilling Global Vision developing products optimized to satisfy the Regional goals / European customer. Management strategy

TOYOTA ANNUAL REPORT 2011 10 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Chairman’s Message President’s Message Toyota Global Vision Toyota Global Vision

To achieve a 50/50 sales ratio between Japan/Europe/United States and the emerging markets Strengthening our production and sales structures by leveraging the Toyota product appeal, thereby exceeding expectations Making Cars that Customers in Each Region Demand Growing sales in emerging markets for a well-balanced revenue structure We are optimizing our global production structure that is being increasingly demanded not only in to meet the needs and scale of each region. Our Japan, the United States and Europe but also in the Until now, Toyota has pursued the production of what we considered “good cars,” based on our principles manufacturing in Japan continues to employ emerging markets. We are also working to strengthen of “Customer First,” “genchi genbutsu” and “Good quality at an affordable price.” Our new vision calls for leading-edge technologies in making high-value- the sales of locally produced IMVs and compact us to build “better cars” that impress our customers by exceeding their expectations. This means fusing added products, so as to uphold its core role in our cars in the emerging markets. Through such efforts, the needs of customers around the world, the values of society and Toyota’s advanced technologies. monozukuri. We are increasing capacity at existing we will realize a balanced business structure, transi- Delivering such cars with the right timing means expanding production capacity in emerging markets European and U.S. plants by working to optimize tioning from the in accordance with the expansion of these markets and revising model production in developed markets available production facilities. Furthermore, in the current sales ratio of to correspond to changes in their market structures. We also must make efforts to optimize and rebuild emerging markets, we are looking into the timing 60% Japan/Europe/ our production structure to make it flexible, efficient and resistant to foreign exchange rate fluctuations. and scale of investment for capacity expansion. United States versus In terms of our sales strategy, we are develop- 40% emerging mar- ing sales for an environment-friendly vehicles society kets to 50/50 by 2015. China Europe A driving force for future growth North America Technology base to support the Strengthening our product appeal Contribute to Toyota’s Greater self-reliance competitiveness as a global huge market Collaboration with IT for the product center for small cars future of mobility Expand our lineup of environment-friendly cars and globally develop Japanese Japan premium brands Monozukuri based on advanced technology and kaizen We aim to create a structure for autonomous partici- (FCVs), creating a structure that can meet the Asia and Oceania pation in car making by local entities and broadly needs of the market. We are proceeding to develop Global center for product development Middle East, Africa and Latin America and preparations for mass production improve styling and feel (good quality that can be highly efficient gasoline engines as well, with of IMV/newly developed small cars Vehicles that win the heart of customers and can felt by the customer by seeing, touching and using). improved fuel economy. be called “my car" with affection in every market

Expand our environment-friendly car lineup Develop the Lexus brand globally We will introduce about 10 new hybrid models by As Japan’s truly global premium brand, Lexus, which Percentage of Sales by Market 2015. These will include compact hybrids that embodies Toyota’s originality through its drivability, with fuel economy rated at 40 km/l or higher, design and technology, is now more customer-friendly which will create true product appeal that exceeds with the adoption of next-generation IT equipment, Emerging 2010 Industrialized Emerging 2015 Industrialized expectations. We are also developing all types including telematics. Lexus is the brand for high markets Sales nations markets Sales nations performance plan of next-generation added value and strong 40% 60% 50% 50% environment-friendly innovation from Japan. cars, including plug- We are working to de- in hybrids (PHVs), liver our full lineup Achieve equal weightings in unit sales between electric vehicles (EVs) worldwide, including industrialized nations and emerging markets and fuel cell vehicles in emerging markets.

TOYOTA ANNUAL REPORT 2011 11 0804 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Chairman’s Message President’s Message Toyota Global Vision Toyota Global Vision

Contributing to the urban development of the future and Development of next-generation automotive technologies leading the way to the future of the automotive industry Toyota’s approach to environmental technology development Realizing the Future Mobility Society Toyota’s three major environmental technology The popularization of environment-friendly development themes are energy source diversity, cars is our primary environmental contribution.

Our new Global Vision promises our customers that we will contribute to enriching the lives of communities CO2 emission (global warming prevention) reduc- Customers make different decisions about what along with better vehicles. Our goal is to be accepted as a good corporate citizen by membership in tion and air pollution prevention. Based on this kind of environment-friendly cars they want, so we such “better communities” through our contributions to creating comfortable, livable towns. These include approach, we are working to improve the fuel are developing all types of next-generation offering comfortable, low-carbon automobiles and new lifestyles through the early practical application economy of cars using conventional engines, environment-friendly cars, including PHVs, EVs of personal robots for mobility support and healthcare, as well as the popularization of hybrids and other which make up the majority of our sales. We have and FCVs, so that the next-generation environment-friendly cars, and safe motoring through the integration of vehicles with also made hybrid (HV) technology our core tech- customer can decide infrastructure. nology in next-generation environment-friendly which is most suit- cars development because it includes the com- able in terms of use, ponent technologies used in the development of performance, price all types of environment-friendly cars. and other factors.

New business strategy

Contributing to building next-generation environment-friendly “smart communities” using smart grids

Toyota sees the next major step in realizing a low- Last year, we developed the Toyota Smart Amenable, carbon society as the use of new smart power Center, a system that links vehicles, homes and low-carbon mobility New lifestyles grids, for which IT is used to control power sup- information, and enables integrated control of Toyota will lead its industry plies to make them stable and achieve energy energy data and information, with trials of the in tackling technological conservation. The Toyota smart grid ties in the system conducted beginning this September recharging of next-generation environment- over smart grids in Toyota City. Toyota will con- advances that will spawn friendly cars (PHV and EV) batteries with “smart tinue to conduct trials and tie-ins with other next-generation mobility. houses” under development by Toyota Housing industries, with the goal of marketing the system. (houses equipped with solar power generators Our goal is to offer and storage batteries, as well as control func- new products and tions for efficient electricity consumption). We services correspond- aim to create a grand next-generation environ- ing to the economic mental city of “smart communities” by gradually and social conditions Preserving popularizing this concept. of each region. environmental quality Infrastructure for Additional details available at Click HERE safer mobility

TOYOTA ANNUAL REPORT 2011 12 0819

Special Feature: Toyota’s Safety Technology Safe and Secure Mobility Toyota’s Approach to Safety

Our three-pronged integrated approach to technology development combining safe vehicles, traffic safety education activities and the creation of a safe traffic environment is a natural consequence of our guiding principle of always providing safe products. This approach pleases our customers with safety and quality and contributes to achieving zero casualties from traffic accidents, which is the ultimate goal of the future mobility society. The real question is how do we relate to people and communities. What are our goals? The following section provides a comprehensive overview of Toyota’s approach to safety, focusing on our safety technologies.

TOYOTA ANNUAL REPORT 2011 13 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Toyota’s Safety Technology Special Feature: Toyota’s Safety Technology

Our Basic Safe Vehicle Philosophy

Contributing to the ultimate goal of the future mobility society: Three-pronged approach integrating people, cars and the traffic environment Zero casualties from traffic accidents The number of traffic fatalities in Japan in 2009 avoiding dangerous situations as well as passive Toyota’s Global Vision reveals that safety is Toyota’s highest priority and it is important to provide highly was just under 5,000, which is roughly one-third safety technology that contributes to injury reliable quality that will enable people to feel good about driving and riding in its vehicles. Toyota takes lower than the historical high. It is likely that this reduction of driver and passengers on vehicle a three-pronged approach to safety that integrates people, cars and the traffic environment. By doing so, reduction is not only because of vehicle collision. We plan to adopt these technologies in we seek to contribute to the ultimate goal of the future mobility society, which is zero casualties from development but also as a result of people- most models and encourage their use. traffic accidents. Another of our core philosophies is to pursue real safety by learning from actual oriented measures, such as improved rates of accidents and continuing to evolve for substantially enhanced safety. seat-belt usage and stricter penalties for traffic Working with government agencies for violations, as well as efforts to create a better enhanced traffic environment safety traffic safety environment, such as making Toyota is going further in our efforts to enhance Safety through our three-pronged integrated approach and improvements at intersections where the traffic environments by participating in “smartway” the real safety lessons learned by studying accidents incidence of accidents is high. projects (next-generation roadways that use IT to In regions that are rapidly becoming motorized, new base for accident analysis and problem link people, cars and roadways) in cooperation driver awareness programs, such as traffic safety resolution. Toyota’s research goal is to contribute Traffic safety education activities for people with government agencies. We will continue our education, are indispensible, as are improvements to the realization of a safe mobility society through Toyota has conducted traffic safety education R&D and testing of the next-generation vehicle to the traffic environment that make accidents improved driver and pedestrian safety and activities for drivers since 1960, and in 2005 we infrastructure integration system. less likely. We believe that our three-pronged security. established the TOYOTA Safety Education Center Additional details available at Click HERE integrated approach, which combines vehicle “mobilitas” at Fuji Speedway with the goal of safety with traffic safety education activities and Toyota’s Approach to Safety increasing traffic safety awareness among traffic environment improvements, is vital to everyone involved in the traffic infrastructure. At Three-Pronged Integrated Approach The safest and realizing a safe mobility society. At the same time, “mobilitas,” we conduct high-quality safe driver most responsible ways of moving people Casualtiesasualties we pursue real safety through the study of actual training, ranging from classroom lectures to People accidents. Accident investigations and analysis training on specialized courses, for the general to reveal the causes of accidents and injuries can public, as well as for companies and other help to pursue safety technologies. We continue organizations. The ultimate goal: to investigate and analyze accidents after vehicles Goal Zero casualties from traffic accidents we have developed reach the market, so we can Vehicle technology for helping to confirm their effectiveness. Three-pronged integrated approach prevent accidents and crash safety Approach These two approaches formed the foundation Pursuit of real safety through Toyota’s pursuit of vehicle safety led to the Zero study of accidents casualties of the Integrated Safety Management Concept development and adoption of technologies such Vehicles Traffic we announced in 2006, and we proceeded with as VSC (Vehicle Stability Control) and GOA Environment Concept Integrated Safety Management Concept (Global Outstanding Assessment) in 1995 and the development of “vehicles that support the 20XX driver in avoiding dangerous situations” by linking PCS (Pre-Crash Safety System) in 2003, each of individual safety technologies and systems. In which was the first of its kind in the world. Toyota January 2011, we established the Collaborative will continue to lead the world in developing active Safety Research Center in North America as our safety technology that supports the driver in

TOYOTA ANNUAL REPORT 2011 14 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Toyota’s Safety Technology Special Feature: Toyota’s Safety Technology

Pursuit of Real Safety: Accident Reconstruction Technology

Developing effective safety technology through accident reconstruction and analysis Accident Reconstruction The world’s largest indoor test facilities Technology Driving Simulator Toyota’s safety technology development pursues real safety. Our first step is to analyze a broad spectrum In 2008, Toyota developed one of the world’s largest driving simulator, of accident investigation data to determine why an accident occurred and what kinds of injuries were equipped with a high-resolution imaging system and providing a full incurred. Next, the accident is reconstructed through a simulation and applicable technologies are 360-degree driving perspective. This allows research on the driver behavior developed. In the final stage we conduct vehicle tests to confirm that the targeted performance has been that precedes crashes, which is difficult to be conducted in a real environment. achieved. By repeating the same conditions multiple times, it is possible to examine We continue to investigate and analyze accidents after the vehicle have reached the market. By the benefits of safety assist equipment. Driving simulator repeating these steps, we pursue to develop safety technologies. This indicates the substantial importance For example, when measuring the effects of the PCS (Pre-Crash Safety System), it is possible to sample and analyze the behavior of a variety of of fundamental technologies for accident reconstruction in the development of safety technologies. drivers by assessing different drivers under repeated, identical conditions. Also, the simulator makes it possible to reconstruct driving condition in a state of reduced consciousness and thereby we are developing technologies for a safety guidance system to early detect states of mind unsuitable for driving. Pursuit of Real Safety Toyota will continue to utilize our driving simulators for tasks such as the analysis of human behavior and measuring the effectiveness of safety systems. Sense of realism through high- Additional details available at Click HERE resolution, full-surround CG

Accident Reconstruction Ascertaining injury mechanisms Technology THUMS—the virtual human model Although crash test dummies used to test the effects of crashes on the hu- Accident Investigation & man body allow for comparisons of load magnitude on the body, they do not Analysis provide the means for analyzing injury mechanisms. This is particularly true in the case of pedestrian accidents, in which body positions change moment by moment, making it difficult to examine what happened where. To meet that challenge, in 2000 Toyota and Toyota Central R&D Labs developed hu- man models known as THUMS (Total Human Model for Safety), starting off Detailed modeling of internal organs with a skeletal model on which the human body is precisely reproduced. The current THUMS Version 4 is made up of 2 million elements. The digital repre- sentation of parts of the body such as the brain, internal organs and muscles enables a detailed analysis of the crash impact on organs.

THUMS: THUMS allows highly detailed analysis of bone fractures, severed ligaments, etc., by simu- lating many characteristics of the human body, ranging from the shape of the body to its skeletal Development & structure and skin. Toyota began developing THUMS in 1997 in cooperation with Toyota Central Simulations Evaluation R&D Labs, Inc. Version 1 was completed and commercially launched in 2000, followed by Version 2 in 2004, which added a face and bones to the model. Version 3 was launched in 2008 through the completion of a model to which a brain was added in 2006. Version 4, with detailed modeling of the shape of internal organs made using high-resolution CT scans, was completed and released in 2010. Ascertaining injury mechanisms Additional details available at Click HERE on crash

TOYOTA ANNUAL REPORT 2011 15 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Toyota’s Safety Technology Special Feature: Toyota’s Safety Technology

Integrating Leading-Edge Safety Technologies Aiming to Make Vehicles Less Likely to Be Involved in an Accident

Toyota technology aiming to minimize risk at every driving stage Pre-crash safety technologies Rescue-related technologies Toyota’s Integrated Safety Management Concept, which is rooted in our technological development, Development of the pre-crash safety system Emergency-response technology should not be thought of as a collection of independent safety systems installed in a vehicle. Rather, the When the pre-crash safety system detects an We are developing technologies that predict danger goal is to link each of these systems to enhance overall effectiveness. Not only the conventional safety obstruction and determines the possibility of collision, prior to emergencies caused by the driver losing it notifies the driver with a warning buzzer. Then the consciousness, such steering wheels equipped with technology area which is focused on the sequence just before and after the accident, we are focusing to pre-crash brake assist is activated and increases the cardiovascular monitors that check for abnormalities provide optimal support at every driving stage, from being parked through normal driving, pre-crash, post- braking force when the driver hits the brake. By while the steering wheel is gripped. In the future, we crash to the arrival of rescue. We are developing active safety, pre-crash safety, passive safety and rescue accident avoidance maneuverability through aim to commercialize systems that can assist daily technologies with the goal of producing vehicles that support the driver in avoiding dangerous situations. extended nighttime sensor range and the integration health maintenance. control of breaking and steering, we are seeking to develop pre-crash safety system which helps to Active safety technology avoid collision as well as reduce collision damage via a “collision avoidance support system.” Sudden VSC (Vehicle Stability Control) Your vehicle Pedestrian Normal Warning change in Sudden Loss of 2004 Crown Majesta condition signs physical stroke consciousness When this driver support system senses a loss of Oncoming vehicle 2003 Harrier First in the world condition Pre-crash 2006 Lexus LS First in the world traction or a slip during cornering or on a slippery Cardiovascular Fatal arrhythmia Brake pattern changes pattern road, braking is automatically applied to all four Area where Pre-crash Brake Assist Pedestrian detection the high beam light is Pre-crash Seatbelt Pedestrian partially blocked out and collision-avoidance individual wheels and engine power is reduced. steering Predict the risk of Additional details available at Click HERE Additional details available at Click HERE a cardiovascular Collision-avoidance Braking control system support PCS abnormality activation VDIM (Vehicle Dynamics Integrated Management) Wrong way driving alert for navigation systems Our ultimate goal: The goal of the VDIM is to provide stability of the Drivers unaware that they are on the wrong side of Zero casualties from traffic accidents vehicle based on vehicle performance control the road can cause serious highway accidents. Our Additional details available at Click HERE technology. Great passive safety and ideal maneu- navigation system sense when the car is traveling verability plus driving stability are fundamental against traffic and alert the driver. Passive safety technologies elements of success. The VDIM effectively aims to Additional details available at Click HERE reduce the possibility of an accident by integrating Vehicle bodies which help to mitigate pedestrian injury ABS, TRC, VSC and power steering together as one. Toyota began manufacturing vehicle bodies that help mitigate pedestrian injury in 2001 and has been Infrastructure-linked expanding their use. Also, we are developing a pop-up hood that even applies to vehicles with low hoods Additional details available at Click HERE driving support safety system that cannot maintain sufficient space underneath by which bumper sensors will detect a collision with a These systems offer transmission between the road pedestrian, automatically lifting the back section of the hood to expand the space under the hood. This Variable light distribution headlamps (ADB) and the vehicle, or between vehicles, to help drivers contributes to a reduction of head injuries to the pedestrians. We are developing an ADB system that aims to retain prevent accidents. (ITS Spot Service (DSRC) vehicle night time visibility nearly equivalent to high-beam infrastructure integration systems, etc.) illumination while high-beam light from ADB-fitted vehicle is partially shielded by ECV automatically to prevent glare that can interfere with the visibility of drivers of vehicles ahead.

ABS： Antilock Braking System THUMS： Total Human Model for Safety ADB： Adaptive Driving Beam TRC： Traction Control DSRC： Dedicated Short Range Communications VDIM： Vehicle Dynamics Integrated Management ITS： Intelligent Transport Systems VSC： Vehicle Stability Control Additional details available at Click HERE PCS： Pre-Crash Safety System

TOYOTA ANNUAL REPORT 2011 16 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Toyota’s Safety Technology Special Feature: Toyota’s Safety Technology

Future Direction of Safety Technologies

Customers can feel good about driving and riding in Toyota’s vehicles Toyota is engaged in developing both active and passive safety technologies, based on the Integrated Placement of a CSTO for vehicle development Safety Management Concept, so as to achieve the future mobility society’s ultimate goal of zero casualties On April 1, 2011, Toyota created the position of chief safety technology officer (CSTO) from traffic accidents. Under the Integrated Safety Management Concept, Toyota is pursuing safety by to comprehensively coordinate Toyota’s safety technologies and appointed Managing linking the various safety systems installed in vehicles. Officer Moritaka Yoshida to the post. The aim of this position is to speed up decision We also intend to secure product safety by thoroughly incorporating data from simulation and making and further strengthen global external communication abilities in the field of vehicle safety technology development. accident analyses, as well as feedback from customers, in our technology development. The CSTO handles the following four main issues: 1) Propose and arrange safety In addition to the reliability design that Toyota has focused on until now for reliable products that are policies; 2) Promote vehicle safety technology development; 3) Coordinate external safety- Managing Officer, CSTO durable, we are pursuing safety design which aims to avoid occurrance of safety issues when malfunctions related explanations and technology information; and 4) Act as a spokesperson about Moritaka Yoshida occur in the vehicles or when our customers drive the vehicles and such design that takes into consideration safety technological aspects. customers feelings. Although the CSTO is Toyota’s representative for our technological progress and enhancement at the global Toyota will continue to develop technologies and work to provide solutions with the goal of offering safety technology and policy level, the CQOs (Chief Quality Officers), who were newly appointed last year, are the world’s highest level of safety. responsible for regional quality control.

Integrated Safety Management Concept Direction of Future Safety Technologies Collision Automotive Technologies Designed to Parking Active Safety Pre-Crash Safety Passive Safety Rescue Achieve Zero Injuries and Fatalities Providing information and support Accident warning and avoidance Damage mitigation Passenger protection Emergency response Integrated Safety Management Concept Integrated Safety Active Safety Management Active Concept Safety Radar Cruise Control Distance Warning Passive Safety Frontal Pre-Collision Passive Safety System with Pedestrian Detection Product Safety Product Safety

Seatbelts Airbags Lane Keeping Assist Lane Departure Warning VDIM Product Safety Brake Assist Back Guide Monitor Ensure safety and peace of mind by reflecting benchmarking and AFS VSC Rear-End Pre-Collision HELPNET customer information in development ABS System Night View Reliability Safety Peace of Mind Intelligent Pedestrian Parking Assist Injury- Reducing Body Design difficult to Design that does not Design taking fail/break cause safety issues customer Network-Linked regardless of customer psychology into Navigation System usage/operation account Vehicle-Infrastructure G-BOOK G-Link Blind Corner Monitor Cooperative System

TOYOTA ANNUAL REPORT 2011 17 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Performance Highlights Automotive Operations Consolidated Performance Highlights Restore and Renew Our Production Structure for Further Growth Financial Services Operations Other Business Operations New Business Activities Support for Recovery from the Great East Japan Earthquake

Consolidated Performance (U.S. GAAP) Consolidated Financial Results

U.S. dollars*1 Consolidated vehicle sales in Japan and overseas increased by 71 thousand units, or Yen in millions in millions % change 1.0%, to 7,308 thousand units for the fiscal year compared to the previous year. Vehicle 2009 2010 2011 2011 2011 vs. 2010 sales in Japan decreased by 11.5%. However, with the efforts of dealers nationwide, For the Year: market share including mini-vehicles was 43.7%, that remained at a high level. Meanwhile, Net Revenues ¥20,529,570 ¥18,950,973 ¥18,993,688 $228,247 +0.2 overseas vehicle sales increased by 6.3%, because of the sales expansion in Asia and Operating Income (Loss) (461,011) 147,516 468,279 5,632 +217.4 Net Income (Loss) attributable to Other Regions. As for the results of operations, net revenues increased by 0.2%, to Toyota Motor Corporation*2 (436,937) 209,456 408,183 4,909 +94.9 ¥18,993.6 billion for the fiscal year compared to the previous year, and operating income ROE -4.0% 2.1% 3.9% — — increased by 217.4%, to ¥468.2 billion. Income before income taxes and equity in earnings

At Year-End: of affiliated companies increased by 93.3%, to ¥563.2 billion. Net income attributable to Total Assets ¥29,062,037 ¥30,349,287 ¥29,818,166 $358,607 −1.7 Toyota Motor Corporation increased by 94.9%, to ¥408.1 billion. Shareholders’ Equity 10,061,207 10,359,723 10,332,371 124,262 −0.3

Yen U.S. dollars*1 % change 2009 2010 2011 2011 2011 vs. 2010 Net Revenues Operating Income

Per Share Data: (¥ Billion) (¥ Billion) Net Income (Loss) attributable to 25,000 2,500 Toyota Motor Corporation*2 ¥ (139.13) ¥ 66.79 ¥ 130.17 $ 1.57 +94.9 2,000 Annual Cash Dividends 100.00 45.00 50.00 0.60 +11.1 20,000 1,500 Shareholders' Equity 3,208.41 3,303.49 3,295.08 39.63 −0.3 15,000 1,000 Stock Information (March 31): 500 Stock Price ¥ 3,120 ¥ 3,745 ¥ 3,350 $ 40.29 −10.5 10,000 Market Capitalization 0 5,000 (Yen in millions, U.S. dollars in millions) ¥10,757,752 ¥12,912,751 ¥11,550,792 $138,915 −10.5 -500 *1: U.S. dollar amounts have been translated at the rate of ¥83.15=US$1, the approximate current exchange rate at March 31, 2011. 0 *2: “Net Income attributable to Toyota Motor Corporation”, equivalent to “Net Income” up to 2009. FY ‘07 ‘08 ‘09 ‘10 ‘11 FY ‘07 ‘08 ‘09 ‘10 ‘11

Net Revenues by Region Net Income (Loss) attributable to Toyota Motor Corporation (¥ Billion) Japan North America Europe Asia Other Regions 16,000 (¥ Billion) 2,500

2,000 12,000 1,500

8,000 1,000 500

4,000 0

-500 0 FY ‘07 ‘10‘09‘08 ‘11 ‘07 ‘10‘09‘08 ‘11 ‘07 ‘10‘09‘08 ‘11 ‘07 ‘10‘09‘08 ‘11 ‘07 ‘10‘09‘08 ‘11 FY ‘07 ‘08 ‘09 ‘10 ‘11

Note: Fiscal years ended March 31 Note: “Net Income attributable to Toyota Motor Corporation”, equivalent to “Net Income” up to 2009.

TOYOTA ANNUAL REPORT 2011 18 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Performance Highlights Automotive Operations Consolidated Performance Highlights Restore and Renew Our Production Structure for Further Growth Financial Services Operations Other Business Operations New Business Activities Support for Recovery from the Great East Japan Earthquake

Consolidated Vehicle Production and Sales

Vehicle Production (Japan) Vehicle Production (Overseas) Thousands of units % change 2009 2010 2011 2011 vs. 2010 (Thousands of units) (Thousands of units) 6,000 6,000 Vehicle Production by Region: Japan 4,255 3,956 3,721 −6.0 5,000 5,000

Overseas Total 2,796 2,853 3,448 +20.9 4,000 4,000 North America 919 1,042 1,338 +28.5 3,000 3,000 Europe 482 433 372 −14.1 Asia 947 1,021 1,344 +31.6 2,000 2,000 Central and South America 151 146 148 +1.6 1,000 1,000 Oceania 130 106 113 +7.1 0 0 Africa 167 105 133 +26.7 FY ‘07 ‘08 ‘09 ‘10 ‘11 FY ‘07 ‘08 ‘09 ‘10 ‘11 Consolidated Total 7,051 6,809 7,169 +5.3 Vehicle Sales by Region: Japan 1,945 2,163 1,913 −11.5 Vehicle Sales (Japan) Vehicle Sales (Overseas) Overseas Total 5,622 5,074 5,395 +6.3 (Thousands of units) (Thousands of units) North America 2,212 2,098 2,031 −3.2 8,000 8,000 Europe 1,062 858 796 −7.3 Asia 905 979 1,255 +28.1 6,000 6,000 Central and South America 279 231 281 +21.9 Oceania 261 251 248 −1.2 4,000 4,000 Africa 289 184 209 +13.0 Middle East 606 466 569 +22.0 Other 8 7 6 −5.3 2,000 2,000

Consolidated Total 7,567 7,237 7,308 +1.0 0 0 FY ‘07 ‘08 ‘09 ‘10 ‘11 FY ‘07 ‘08 ‘09 ‘10 ‘11 Note: Fiscal years ended March 31 Principal Market Data: Automotive Market (Sales)

(Thousands of units) Japan United States Europe Asia China 20,000

15,000

10,000 Source: Toyota Motor Corporation Note: Market definitions are as follows Europe: Germany, France, the United Kingdom, Italy, Spain, the Netherlands, Belgium, 5,000 Portugal, Denmark, Greece, Ireland, Sweden, Austria, Finland, Switzerland, Norway, Poland, Hungary, and the Czech Republic Asia: Indonesia, Thailand, the Philippines, Malaysia, Singapore, Vietnam, Taiwan, 0 South Korea and Brunei Darussalam CY ‘06 ‘09‘08‘07 ‘10 ‘06 ‘09‘08‘07 ‘10 ‘06 ‘09‘08‘07 ‘10 ‘06 ‘09‘08‘07 ‘10 ‘06 ‘09‘08‘07 ‘10 Japan: minivehicles included

TOYOTA ANNUAL REPORT 2011 19 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Performance Highlights Automotive Operations Automotive Operations (Market Environment and Overview) Restore and Renew Our Production Structure for Further Growth Financial Services Operations Other Business Operations New Business Activities Support for Recovery from the Great East Japan Earthquake

Net Revenues Operating Income year. Sales of the Lexus brand were at approximately thousand units.

(¥ Billion) (¥ Billion) 30 thousand units. Consolidated vehicle production Consolidated vehicle production declined 25,000 2,200 was down 5.9% year-on-year, to 3.72 million units. 14.1% year-on-year, to 372 thousand units. 2,000 As a result, net revenues were ¥10.99 trillion, a As a result, net revenues decreased ¥165.6 20,000 1,800 decrease of ¥234.1 billion or 2.1% year-on-year. billion, or 7.7% year-on-year, to ¥1.98 trillion. Despite cost-reduction efforts, the impact of Nonetheless, operating income increased ¥46.1 15,000 1,600 currency exchange fluctuations and decreases in billion year-on-year due to expense reductions. production and units sold resulted in an operating 10,000 200 loss of ¥362.4 billion, a ¥137.2 billion higher loss Asia 0 than the previous fiscal year’s operating loss of Consolidated vehicle sales in Asia in FY2011 rose 5,000 -200 ¥225.2 billion. 276 thousand units, or 28.2% year-on-year, to 0 -400 1.26 million units, due to an overall recovery of the FY ‘07 ‘08 ‘09 ‘10 ‘11 FY ‘07 ‘08 ‘09 ‘10 ‘11 North America Asian market led by economic growth in Thailand Note: Fiscal years ended March 31 Consolidated vehicle sales in North America in and Indonesia. Consolidated vehicle production FY2011 decreased by 67 thousand units, or 3.2% also rose 31.6% year-on-year, to 1.34 million units. Under its founding philosophy of contributing to society through the manufacture of automobiles, year-on-year, to 2.03 million units, due to the impact As a result, net revenues were ¥3.37 trillion, a Toyota is dedicated to creating “better cars” that are accepted by our customers and society, and of a fiercely competitive environment caused by rise of ¥719.2 billion or 27.1% year-on-year. continues its efforts to manufacture vehicles that meet the needs of countries and regions and the introduction of new models by competitors Operating income also rose due to increased strengthen its initiatives regarding environmentally friendly models. and other factors. Market share (2010) in the product and sales units, to ¥313.0 billion, an United States was 15.2%. Sales of the Lexus increase of ¥109.4 billion or 53.8% year-on-year. brand in North America were at approximately Sales in China, which continues to experience 235 thousand units. Consolidated vehicle strong economic growth, reached 846 thousand Market Environment and Performance Summary production reached 1.34 million units, a 28.4% units in 2010, a year-on-year increase of 19.3%.

During the fiscal year ended March 31, 2011, year-on-year to ¥17.34 trillion. Despite the impact increase year-on-year. * Unit sales figures for China include domestically produced Automotive Operations continued to expand in of currency exchange fluctuations, increased As a result, net revenues were ¥5.43 trillion, a units as well as units imported from Japan. China and other emerging markets. The market revenues and cost-reduction efforts resulted in decrease of ¥241.4 billion or 4.3% year-on-year. was characterized by a transition to small and operating income of ¥86.0 billion, a gain of ¥172.3 Due to the decrease in the provision for credit Central and South America, Oceania, Africa, low-priced vehicles, in addition to which growing billion compared with the previous fiscal year. losses of sales finance subsidiaries in the United the Middle East, etc. environmental awareness across the globe Performance by geographic segments was States, as well as production increases and cost Among these regions, sales in FY2011 grew in spurred the active development of new as follows. reduction efforts, operating income quadrupled Central and South America, Africa, and the Middle technologies and the introduction of new products. year-on-year, reaching ¥339.5 billion. East, with combined sales reaching 1.31 million Within this market environment, consolidated Japan units, an increase of 174 thousand units or 15.3% vehicle sales both in Japan and overseas (including In FY2011, consolidated vehicle sales in Japan Europe year-on-year. Consolidated vehicle production Daihatsu and Hino) reached 7.31 million units, an decreased due to weak market conditions Consolidated vehicle sales in Europe during the (Central and South America, Oceania, Africa) was increase of 71 thousand units, or 1%, over the compared with the prior fiscal year, down by 250 period under review declined 7.2%, or 62 394 thousand units, an increase of 37 thousand or previous fiscal year. Consolidated vehicle thousand units, or 11.5%, to 1.91 million units. thousand units year-on-year, to 796 thousand 10.4% compared with the previous year. production also increased, rising by 360 thousand Market share for Toyota and Lexus brands, units, due to a reduction of demand stimulus As a result, net revenue reached ¥1.81 trillion, a units, or 5.3% year-on-year, to 7.17 million units. excluding minivehicles, was 47.3%, while the share measures by European governments. Toyota’s year-on-year increase of 8.1% or ¥135.3 billion, Due to the rise in both vehicle production and including minivehicles was 43.7%, indicating a European market share (2010; about 40 countries) while operating income also increased ¥44.6 billion vehicle sales, net revenues also increased 0.8% strong market share continuing from the previous was 4.4%. Lexus sales totaled approximately 36 or 38.6% year-on-year, reaching ¥160.1 billion.

TOYOTA ANNUAL REPORT 2011 20 0810 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Performance Highlights Automotive Operations Restore and Renew Our Production Structure for Further Growth Restore and Renew Our Production Structure for Further Growth Financial Services Operations Other Business Operations New Business Activities Support for Recovery from the Great East Japan Earthquake

Promoting restoration and renewal by enlisting the strength of on-the-spot human resources Efforts toward Further Growth The Toyota Group has established a trilateral structure to Reconstructing our production structure unite us in our effort to build better cars Our philosophy is “to produce where there is demand” globally, so our basic strategy is to strengthen our supply capacity in emerging economies and resource-rich countries while maximizing the potential of Japan and the The Toyota Group’s production bases were affected by the Great East Japan Earthquake, which developed countries. struck on March 11, 2011. Nonetheless, by July we had restored our production levels to more The manufacturing environment in Japan is challenging, but Toyota’s policy is to maintain production in Japan or less normal in terms of volume. We are moving forward with efforts to reconstruct our of three million vehicles. We believe that we can accelerate Toyota’s medium- to long-term growth, as well as that of production structure so as to restore and renew it to enable further future growth. We will Japanese industry, and contribute to global economic development by developing new technologies and manufacturing methods that are “possible in Japan,” and subsequently establishing mass production of these maximize the strengths and resources of each company in our Group, and use our combined technologies at Japanese manufacturing sites and spreading them throughout the world. power to enhance the international competitiveness of Japanese manufacturing. Restructuring the Group to strengthen manufacturing Impact of the Earthquake and Forecast Toyota has established a new plan for restructuring our domestic production structure so as to strengthen manufacturing. Toyota has reached agreement with Toyota Auto Body and Kanto Auto Works to convert those Impact of the earthquake and status of recovery companies to wholly owned subsidiaries of Toyota in January 2012. In addition, Kanto Auto Works, Central Many of our parts suppliers are located in the affected areas of Tohoku and northern Kanto, so Toyota did suffer Motor Co. and Toyota Motor Tohoku Corporation have reached an agreement to begin discussions for the some effects in the immediate aftermath of the Great East Japan Earthquake, such as a temporary production halt proposed merger and integration of the three companies (targeted July 2012). The goal is to enhance at our domestic auto manufacturing facilities. Toyota immediately initiated relief efforts in the aftermath of the manufacturing specialization and provide a more accurate response to customer demands, while reducing the earthquake, such as dispatching personnel to the affected areas, and we, together with our Group companies costs of development and production. and affiliates, began working to recover from the disaster. In terms of impact on our 2011 Production Plan, we Until now, each auto manufacturer in the Toyota Group has had a defined role to play from development experienced a loss of production of approximately 800 thousand units through June, and despite a forecast through production in supporting the manufacturing of Toyota vehicles. The new structure will call for each auto recovery of approximately 350 thousand units from October onward we expect to come in at roughly 450 thousand manufacturer to act on its own initiative in fulfilling a role in its area of expertise. This means each will become units under our production goal for FY2012 (as of June 10, 2011). a company that can execute the Toyota business strategy. We will strengthen ties in the area of supply strategy Our plants, dealers and suppliers have been working in unison to restore production to normal levels, and from as well, including marketing and product planning strategy and overseas business. April 18 all of our plants, including the Central Motors Plant in Miyagi Prefecture and the Kanto Motors Plant in Iwate Creation of new markets through a trilateral domestic production structure Prefecture, were again producing cars. By June, we had returned to around 70% of our normal production levels By restructuring the production structure in Tohoku, Toyota is moving forward with plans to create a Tohoku overall for our domestic and overseas plants, and by July we had recovered to the levels on which our annual plan was area manufacturing hub, which would be Toyota’s third national manufacturing hub following Chubu and Kyushu. based. Production of all lines and models are forecast to be at normal production levels for the second half of FY2012. The Tohoku hub will specialize in the development and production of compact cars as a comprehensive, Production forecast for the second half of FY2012 independent base for production and the procurement of engines and other units, as well as parts. Toyota has Toyota began steps to normalize both domestic and overseas production in June. Unit production will recover in also decided to produce our new small hybrids, one of the main focuses of our effort to build environmentally the second half of the year, with unit production of Toyota and Lexus vehicles for the fiscal year ending March 31, friendly vehicles, in Tohoku. Toyota expects Kyushu to become the hub for mid-sized and Lexus brand vehicle 2012, expected to be approximately 7.39 million units, an increase of 48 thousand units over the same period in production and Chubu to become the hub for technological and manufacturing innovation. The role of each the previous year (April 2010–March 2011) (as of June 10, 2011). region has been clarified so as to lead to the building of better cars and to create new markets that will allow Adjustments were made to North American production after the earthquake, and we aimed to normalize our suppliers and manufacturers worldwide to work as one and please our customers. production ahead of schedule, that is, in May, of eight of the 12 vehicles made there. In China, the status of parts Roles of the three hubs supply and inventory varies from plant to plant, and we have been working since June with our partners to confirm Role Concept and negotiate parts supply so as to proceed toward the normalization of production. We have set supply targets Chubu Core of domestic production/Hub of new technology and new manufacturing method development Development of technological innovation for the 17 plants in Asia and Oceania where production adjustments were made and are working to restore normal Kyushu Hub for mid-sized and Lexus brand vehicle production Application of mass production innovation operations or increase rates of operation to achieve normalization. Tohoku Specializing in compact cars

TOYOTA ANNUAL REPORT 2011 21 0728 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Performance Highlights Automotive Operations Financial Services Operations Restore and Renew Our Production Structure for Further Growth Financial Services Operations Other Business Operations New Business Activities Support for Recovery from the Great East Japan Earthquake

Net Revenues Operating Income Overview of Toyota’s Financial Services Operations

(¥ Billion) (¥ Billion) 1,500 400 Total assets ¥13.3 trillion

300 Net revenues ¥1.2 trillion

1,000 200 Operating income ¥358.2 billion

100 Operating areas 33 countries and 500 regions worldwide

0 No. of employees approx. 8,000

0 -100 FY ‘07 ‘08 ‘09 ‘10 ‘11 FY ‘07 ‘08 ‘09 ‘10 ‘11 (As of March 31, 2011)

Note: Fiscal years ended March 31

Toyota provides automotive financing and a variety of other financial services aimed at providing total support for our customers’ lifestyles.

Market Environment and Performance Summary

In fiscal 2011, our financial services operations generated operating income of ¥358.2 billion. This was In response to dramatic changes in the business environment, Toyota Financial Services will further mainly due to an increase in the volume of financings and a broad decrease in expenses related to loan strengthen its group-wide compliance and risk management structures, as well as focus on enhancing losses and residual value losses. its business foundation through IT platform development, management personnel training and other Our financial services operations are primarily handled by Toyota Financial Services Corporation, efforts. which has overall control of our financial services subsidiaries worldwide. Toyota Financial Services provides financial services primarily for vehicle purchases and leases to approximately 8.5 million Financial Services Operations Organization customers in 33 countries and regions worldwide. Operating activities during the period under review included enhancing our relationships with distributors by providing financial products and services that met various national and regional customer Toyota Motor Corporation characteristics among regional strategies. In Japan, in addition to automotive financing, Toyota Financial Services broadens customer Toyota relationships through the provision of credit cards, home loans and other sound financial services Financial Services designed to closely match the needs of our customers. Corporation Overseas, Toyota Financial Services has engaged in active efforts to develop business in emerging markets. During the fiscal year under review, it expanded operations in China to include 157 cities, with Overseas Toyota Toyota Finance sales bases in the major coastal cities as well as in the interior. Sales Finance Asset Management Corporation In such major markets as Europe and the United States, Toyota Financial Services aims to ensure Companies Co., Ltd. stable revenues by continuing to balance vehicle sales support with a variety of business risks, as well as by securing margins and achieving thorough low-cost operations.

TOYOTA ANNUAL REPORT 2011 22 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Performance Highlights Automotive Operations Other Business Operations Restore and Renew Our Production Structure for Further Growth Financial Services Operations Other Business Operations New Business Activities Support for Recovery from the Great East Japan Earthquake

Net Revenues Operating Income participated in road tests and public demonstrations in various

(¥ Billion) (¥ Billion) regions through the cooperation of the public and private sectors. 1,400 40 In the autumn of 2009, Toyota developed an onboard communications device that corresponds to the ITS Spot Service for traffic and safe 1,300 30 driving support information, ahead of the full-scale launch of that service in the spring of 2011. Toyota will continue to expand the number of 1,200 20 models equipped with this device. Additional details available at Click HERE 1,100 10

Information Technology and Telecommunications Business 1,000 0 In addition to serving as a sales agency for mobile phones provided 0 -10 by KDDI Corporation (a general telecommunications service FY ‘07 ‘08 ‘09 ‘10 ‘11 FY ‘07 ‘08 ‘09 ‘10 ‘11 provider), Toyota is engaged in the promotion of services that link Note: Fiscal years ended March 31 mobile phones with technologies such as car navigation systems and G-BOOK (information service for onboard terminals). Toyota is Toyota uses technologies and expertise gained from automotive operations to operate a variety of promoting the sale of car navigation systems by offering appealing businesses that help people lead more fulfilling and enjoyable lives. system functions such as hands-free telephones using wireless Bluetooth® communications and the playback of songs downloaded to a cell phone, as well as map renewal and user-based destination setting services that employ telecommunications. Market Environment and Performance Summary * Bluetooth® is a wireless technology that uses short-length radio waves to enable During the fiscal year under review, Toyota Motor Corporation transferred all housing business operations, communications between cell phones and other devices over short distances. which constitute the core business in this segment, to Toyota Housing Corporation effective October 2010. The aim of this move is to integrate the operational organization and enhance specialization, as well e-TOYOTA Business as to consolidate development, production and sales under a management structure that is flexible and Toyota is developing e-TOYOTA business operations to facilitate the capable of quick decision making. As a result, net revenues for other business operations rose ¥24.6 integration of IT services and automobiles. We designed and billion, or 2.6% year on year, to ¥972.2 billion, whereas operating income improved to ¥35.2 billion, an developed the GAZOO members-only automobile portal site, a three- increase of ¥44.1 billion compared with the previous fiscal year. dimensional virtual city called METAPOLIS and other services. In the Other business operations include the intelligent transport systems, information technology and field of telematics, we are developing G-BOOK/G-Link, an information telecommunications, e-TOYOTA, housing, marine, and biotechnology and afforestation businesses. In all service for onboard terminals, with other telematics services planned these operations, we are fostering a workplace culture that encourages creativity and entrepreneurship. for China and other countries. Additional details available at Click HERE Also, we are seeking ideas for new businesses outside the Toyota Group as another key aspect in order to create future core businesses. Housing Business Intelligent Transport Systems Business Since Toyota entered the housing business in 1975, Toyota Housing Corporation has expanded to provide Toyota is involved in the planning and development of products and services for Intelligent Transport homes as Toyota Home offering high durability and earthquake resistance, as well as excellent security, Systems (ITS). We view this technology as a valuable way to link motor vehicles and transportation health and environmental features. From January 2010, we began using the catchall phrase Eco-Mirai infrastructures, thereby contributing to sustainable economic development. We are continuing work on Home as an expression of the product features involved in our building environment-friendly homes that the creation of vehicle-infrastructure cooperative systems that support safe driving so that traffic accidents conserve and create energy while having the durability to last for many years. Toyota Housing Corporation of the future can be prevented more effectively than current safety technologies allow. To this end, we combines the technologies of the Toyota Group to offer comfortable and economical homes that are

TOYOTA ANNUAL REPORT 2011 23 0722 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Performance Highlights Automotive Operations Other Business Operations Restore and Renew Our Production Structure for Further Growth Financial Services Operations Other Business Operations New Business Activities Support for Recovery from the Great East Japan Earthquake

gentle on the environment, while at the same time engaging in Biotechnology and Afforestation Business leading-edge development in a variety of fields, such as the Toyota is making every effort to contribute to the creation of a resource operational testing of smart grids. recycling society through our afforestation activities, as well as our horticultural, environmental greening and agricultural biomass Note: Effective October 1, 2010, all housing operation production and technical development functions were transferred from Toyota Motor Corporation to Toyota operations. Housing Corporation. Additional details available at Click HERE Following previous afforestation and forestry development projects in Australia, the Philippines and China, we are engaged in a forest restoration model project in the town of Odaicho, located in Marine Business Japan’s Mie Prefecture. In May 2010, this forest project acquired In the marine business, Toyota manufactures and sells pleasure Forest Stewardship Council (FSC) certification. In our environmental boats, marine engines and a variety of marine components. All greening business, we began selling Toyota/Midorie Hybrid Green products take full advantage of our engine technologies and other rooftop greenery products, which we jointly developed with Suntory advanced technologies cultivated during years of automotive Midorie, while in our agricultural biomass operations we launched a manufacturing. swine manure composting facility deodorizer that is the second This year, Toyota announced the PONAM-35, our first new vessel product in the ResQ Series. in the five years since the PONAM-45. We will continue to expand our Additional details available at Click HERE Philippine and China afforestation projects Click HERE lineup in the future. Additional details available at Click HERE

Motorsports Our main areas of motorsports participation in 2010 were SUPER enjoyable participation-type event for our customers. Also, by GT and Formula Nippon series racing in Japan and NASCAR in the participating in the 24-Hour Nürburgring racing competition our United States, all of which we promote as “spectator motorsports.” personnel get hands-on training in building good, fine-tuned Also, from last year we sought to strengthen and further promote automobiles. our “grassroots motorsports” programs, so as to create opportunities We will continue to provide opportunities for our customers to for more people to enjoy the thrill of automobiles easily. enjoy motorsports by making the “spectator motorsports” and Our “grassroots motorsports” programs include GAZOO “grassroots motorsports” categories the focus of our motorsports Racing, which conveys the dreams and excitement of automobile projects in 2011. racing, as well as other events such as the Waku Doki Circuit, an Additional details available at Click HERE

SUPER GT Formula Nippon NASCAR Waku Doki Circuit

TOYOTA ANNUAL REPORT 2011 24 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Performance Highlights Automotive Operations New Business Activities Restore and Renew Our Production Structure for Further Growth Financial Services Operations Other Business Operations New Business Activities Support for Recovery from the Great East Japan Earthquake

Realization of a our new vision of the “future mobility society” requires the widespread use of next- Efforts to make smart grids a reality generation environment-friendly cars as well as an infrastructure that can properly manage electricity Participation in trials worldwide demand. Toyota is strengthening our smart grid effort, and that effort includes moving forward with trials and testing in various regions and our active cooperation with other industries. Toyota is conducting trials in Japan and a number of countries, such as the United States, China, and France, in cooperation with national and local governments, so as popularize smart grids and environment-friendly cars.

The Toyota smart grid concept China America The Toyota Smart Center optimizes environment-friendly car battery charging Tianjin Boulder, Colorado and home energy management Joint project with CATARC (China Automotive Technology and First city-level project to evaluate PHV usability and charging Research Center) to evaluate PHV usability and charging performance. performance and conduct trials of home/PHV links. The daily power use of environment-friendly cars such as plug-in hybrid vehicles (PHVs) and electric vehicles (EVs) is thought to be equal to 30% of the power consumption of the average home. Achievement

of a low-carbon society will require the widespread use of environment-friendly cars, so optimal Japan

management of battery charging and home energy is essential. To meet this aim we have developed our Rokkasho Village, Aomori Prefecture Toyota Smart Center, a system that uses smart-grid technology to link homes, vehicles, and users. Trials involving powering homes and PHVs using only The smart grid envisioned by Toyota is centered on the Smart Center, and manages the power supply natural (wind + solar) energy France to “smart houses” developed by Toyota Housing while monitoring the power use status of each home EV/PHV Towns INES* project Project with the Ministry of Economy, Trade, and Industry (METI) conducting regional through a data center. This enables it to reduce the CO2 emissions of the entire region while minimizing public relations with local governments in 18 designated model prefectures nationwide Project in cooperation with the French government to build including, encouraging the use of environment-friendly cars as public service vehicles. costs. It does so by monitoring both the remaining battery power data transmitted by the car and the power a power management system utilizing solar power. Kitakyushu City, Fukuoka Prefecture consumption data from the home, and then proceeds to make a comprehensive determination about how * Institut National de l’Energie Solaire Strasbourg Project with METI that conducts trials in plant energy management, which is of to optimize power use by also taking into account factors such as weather conditions and power company particular interest because of Kitakyushu’s status as an industrial city. Project conducted in cooperation fee schedules. Car batteries can then be charged during times of day when the grid power load is low, and with EDF (French power company), Toyota City, Aichi Prefecture the home’s own power supply from solar panels and storage batteries can be used efficiently. The goal is consisting of introducing 70 PHVs, Project conducted in cooperation with METI that involves the sale of 67 Toyota confirming vehicle/infrastructure Housing demonstration houses and is aimed at optimizing energy use from a consumer to create “smart communities” that optimize the power usage of the entire residential area. performance and assessing battery perspective. Four thousand production-model PHVs and EVs were introduced as part charging. of the effort to construct a low-carbon transportation system. Smart grid Toyota envisions

Toyota Smart Center Leveling of power demand Cooperation with other industries to speed up smart grid development Power company Self-supplying Total support for low-carbon, Shifting car-charging power to periods with low Use of the latest IT technology and the expanding data infrastructure energy-saving life power demand

Sunlight / Temperature / Wind Optimum Power Toyota actively seeks cooperation with other industries. Gathering calculation consumption/ Car data for storage charging Home In April of this year, Toyota teamed up with Microsoft to establish Demand power power consumption Electricity rates by periods energy use planning Windows Azure cloud service as the IT platform for operating Toyota’s own (hour) 0 6 12 18 23 data center, with the goal of reducing costs and achieving systems expandability. The two companies will work together to build a global cloud platform by 2015 to develop the Toyota Smart Center worldwide, with the Town (smart shop) Home (smart house) Car (PHV, EV) People (smart phone) goal of early achievement of a low-carbon, energy efficient society. WiFi network Solar panels G-BOOK Supporting eco-driving Also in April, Toyota teamed up with WiTricity to develop wireless, “non- G-Station HEMS* Network connecting cars, Checking battery level Notifies smart phones Controls home electricity supply/demand homes and people Setting charging time contact charging” that charges up batteries simply by bringing them into Remote air-conditioning when charging ends (generation, storage, consumption) Car batteries proximity with chargers embedded in homes or parking spaces. In May, Toyota Storage battery Used as a household power source Supporting ECO life Stores electricity generated in emergencies Home power consumption monitor and Salesforce.com formed a strategic alliance to build “Toyota Friend,” a Appliances remote control by solar panels private social network for connecting people, cars, dealers and manufacturers. Charging outlet ＊HEMS： Home Energy Management System Alliances with Microsoft (top photo) and Salesforce.com (bottom photo)

TOYOTA ANNUAL REPORT 2011 25 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Performance Highlights Automotive Operations Support for Recovery from the Great East Japan Earthquake Restore and Renew Our Production Structure for Further Growth Financial Services Operations Other Business Operations New Business Activities Support for Recovery from the Great East Japan Earthquake

TOPICS Support for Recovery from the Great East Japan Earthquake

Since the Great East Japan Earthquake struck on March 11, Toyota has been engaged in a variety of recovery efforts. The Toyota Group, including our affiliates and dealers, will continue to do all we can to assist in the recovery.

Provision of funds Provision of dorm rooms and Toyota company housing Toyota has pledged ¥300 million to charities, including the Central Community Through Aichi Prefecture authorities, Toyota is providing 160 apartments in Chest of Japan and Japan Platform. In addition, a donation from our executives and Toyota company housing and 320 dorm rooms in Aichi Prefecture to evacuees employees of approximately ¥55 million was made to the Japanese Red Cross. needing shelter. Children are the “strength for the future” that will drive the recovery of the Tohoku region, so Toyota will donate ¥100 million each to the educational- Provision of support for agriculture assistance funds for children orphaned by the disaster established by the Iwate In close cooperation with Nippon Keidanren’s relief efforts, Toyota is engaged and Miyagi prefectural governments, as well to that planned for establishment in the following activities to help support those involved in agriculture and food by Fukushima Prefecture (for a total of ¥300 million). In addition, Toyota will production in the Tohoku and Kanto regions directly affected by the disaster or donate to funds that develop activities for support to the stricken areas through by rumors concerning fallout from the Fukushima nuclear reactor. the arts and culture, and we will also sponsor events such as charity concerts At Toyota’s headquarters, Nagoya and Tokyo offices: Serving meals in the in support of recovery efforts. employee dining halls made with produce from Tohoku and Kanto, and selling produce and goods from the regions at shops for employees. Provision of supplies At Toyota’s Tokyo office lobby: Hosting markets selling produce and So far, Toyota has sent 87 11-ton trucks to the region containing such items as processed items from Tohoku and Kanto. foodstuffs, drinking water, daily necessities, medical supplies and equipment At Toyota’s headquarters, Nagoya and Tokyo offices: Selling processed for recovery work. (Some of these trucks contained items for the recovery food items from Tohoku and Kanto in our company stores. efforts collected from Toyota dealers across the country.) Also, in addition to supplying fuel such as kerosene, seven tanker trucks have been sent to Provision of personnel provide water to the stricken areas. Toyota dispatched about 60 employees to the affected areas in the immediate aftermath of the earthquake, where they mainly focused on distributing Provision of vehicles emergency provisions and also worked to support the recovery of companies Toyota is providing approximately 260 vehicles for use in the four stricken affiliated with the Toyota Group. We have continued to send volunteers from prefectures of Iwate, Miyagi, Fukushima and Ibaraki. 15 Toyota Group and affiliated companies, and currently have about 140 employees engaged in relief efforts.

TOYOTA ANNUAL REPORT 2011 26 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

R&D and Intellectual Property Corporate Philosophy R&D and Intellectual Property Management Team Corporate Governance Risk Factors Other Management and Corporate Data

Toyota R&D is dedicated to the development of attractive, affordable, high-quality products for R&D Expenditures R&D Expenses

customers worldwide. The intellectual property that R&D generates is a vital management resource In fiscal 2011, R&D expenditures totaled ¥730.3 (¥ Billion) that Toyota utilizes and protects to maximize its corporate value. billion, up 0.6% from the previous fiscal year, 1,000 representing 3.8% of consolidated net revenues. We worked closely with suppliers to develop 800 components and products more efficiently and 600 R&D Guiding Principles took steps to reduce our own R&D expenses. At the same time, we plan to continue making 400 substantial investments in R&D involving forward- Providing clean and safe products and enhancing the quality of life of people everywhere looking, leading-edge technologies and the through all our activities. 200 development of products associated with the Pursuing advanced technological development in a wide range of fields, we pledge to provide environment, energy, and safety. These 0 FY ‘07 ‘08 ‘09 ‘10 ‘11 attractive products and services that respond to the needs of customers worldwide. investments are essential to preserving our competitive edge in terms of technologies and products.

R&D Organization R&D Activities Toyota operates a global R&D organization with the primary goal of building automobiles that precisely The overriding goal of Toyota’s technology and product development activities is to minimize the negative meet the needs of customers in every region of the world. aspects of driving, such as traffic accidents and the burden that automobiles have on the environment, In Japan, R&D operations are led by Toyota Central Research & Development Laboratories, Inc., and maximize the positive aspects, such as driving pleasure, comfort, and convenience. By achieving which works closely with Daihatsu Motor Co., Ltd., Hino Motors, Ltd., Toyota Auto Body Co., Ltd., Kanto these sometimes conflicting goals to a high degree, we want to open the door to the automobile society Auto Works, Ltd., and many other Toyota Group companies. Overseas, we have a worldwide network of of the future. technical centers as well as design and motorsports R&D centers. To ensure efficient progress in R&D activities, we coordinate and integrate all phases, from basic research to forward-looking technology and product development. With respect to such basic research Domestic and Overseas R&D Bases issues as energy, the environment, information technology, telecommunications, and materials, projects Facility Name Activities Location are regularly reviewed and evaluated in consultation with outside experts to achieve efficient R&D cost Japan Product planning, design, prototype development, Head Office Toyota Technical Center Toyota City, Aichi Prefecture control. vehicle evaluation And with respect to forward-looking, leading-edge technology and product development, we Toyota Central Research & Development Fundamental research for the Toyota Group Aichi County, Aichi Prefecture establish cost-performance benchmarks on a project-by-project basis to ensure efficient development Laboratories, Inc. Mishuku, Susono City, Higashi-Fuji Technical Center New technology research for vehicles and engines investment. Shizuoka Prefecture Vehicle testing and evaluation at high speed and Onnebetsu, Shibetsu City, Shibetsu Proving Ground under cold conditions Hokkaido Development theme discovery Research on basic vehicle-related technology Tokyo Technical Center Advanced research for electronic systems Minato-ku, Tokyo Basic research Forward-Looking and Leading-Edge Technology Development

Technological breakthroughs related to Development of leading-edge components and systems ahead of competitors components and systems

Primary responsibility for new model development Product development Development of all-new models and existing-model upgrades Head Office Toyota Technical Center Toyota Central Research & Development Laboratories, Inc.

TOYOTA ANNUAL REPORT 2011 27 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

R&D and Intellectual Property Corporate Philosophy R&D and Intellectual Property Management Team Corporate Governance Risk Factors Other Management and Corporate Data

Facility Name Activities Location Intellectual Property Guiding Principle USA Ann Arbor, Michigan Toyota Motor Engineering & Manufacturing Vehicle development & evaluation, certification, Torrance, California collection of technical information Securing greater corporate flexibility and maximizing corporate value through the appropriate North America, Inc. Wittman, Arizona acquisition and utilization of intellectual property. Newport Beach, California Calty Design Research, Inc. Exterior / Interior / Color design Ann Arbor, Michigan

Intellectual Property Activities Toyota’s competitiveness springs from the forward-looking R&D stance that is instrumental to core strengths associated with products and technologies. Underlying each new product that emerges from R&D, there are always intellectual properties such as inventions and expertise that we value as important Toyota Motor Engineering & Manufacturing Calty Design Research, Inc. North America, Inc. management resources.

Intellectual Property Systems Europe Vehicle development & evaluation, certification, Brussels, Belgium R&D and intellectual property activities are organizationally linked to enable us to focus on selected Toyota Motor Europe R&D/Manufacturing collection of technical information Derby, U.K. development themes and build a strong patent portfolio. We have established an Intellectual Property Calty Design Research, Inc. Toyota Europe Design Development Nice, France Committee made up of individuals involved with management, R&D, and intellectual property. This committee acquires and utilizes important intellectual property that contributes to business operations and helps determine policies for management risks associated with intellectual property.

Intellectual Property Strategies Toyota carefully analyzes patents and the need for patents in each area of research to formulate more effective R&D strategies. We identify R&D projects in which Toyota should acquire patents, and file Toyota Motor Europe R&D/Manufacturing Toyota Europe Design Development relevant applications as necessary to help build a strong global patent portfolio. In addition, we want to contribute to sustainable mobility by promoting the spread of technologies with environmental and safety Asia Pacific benefits. This is why we take an open stance to patent licensing, and grant licenses when appropriate Toyota Motor Asia Pacific Engineering and Vehicle development, software development, Samutprakarn Province, Thailand terms are met. A good example of this policy is the licensing to other companies of patents in the area of Manufacturing Co., Ltd. evaluation, collection of technical information hybrid technology, which is one of our core technologies involving environmental energy. Toyota Technical Center Asia Pacific Australia Vehicle development, software development, Melbourne, Australia Pty., Ltd. evaluation, collection of technical information

Toyota Motor Asia Pacific Engineering and Toyota Technical Center Asia Pacific Manufacturing Co., Ltd. Australia Pty., Ltd.

Additional details available at Click HERE

TOYOTA ANNUAL REPORT 2011 28 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

R&D and Intellectual Property Corporate Philosophy Corporate Philosophy Management Team Corporate Governance Risk Factors Other Management and Corporate Data

Seeking Harmony between People, Society and the Global Environment, and Sustainable Development of Society through Manufacturing

Since its foundation, Toyota has continuously strived to contribute to the sustainable development Toyota Guiding Principles of society through the manufacturing and provision of innovative and quality products and services that lead the times. The foundations of these endeavors are the Toyota Guiding Principles and an The Toyota Guiding Principles (adopted in 1992 and revised in 1997) reflect the kind of company that explanation paper entitled “CSR POLICY: Contribution towards Sustainable Development” that Toyota seeks to be in light of the unique management philosophy, values, and methods that it has interprets the Toyota Guiding Principles. The CSR Policy has been compiled based on the Toyota embraced since its foundation. Toyota, along with its consolidated subsidiaries, seeks to contribute to the Guiding Principles and takes into consideration Toyota’s relations with stakeholders. By having all continuous development of human society and of the planet through its businesses based on employees embrace this policy and act accordingly, Toyota aims to remain a company that is understanding and sharing the Toyota Guiding Principles. admired and trusted by society.

1. Honor the language and spirit of the law of every nation and undertake open and fair business activities to be a good corporate citizen of the world.

2. Respect the culture and customs of every nation and contribute to economic and social development Five Main Principles of Toyoda through corporate activities in their respective communities.

The spirit of the Toyoda Precepts has been passed down since Toyota’s Foundation. 3. Dedicate our business to providing clean and safe products and to enhancing the quality of life The Toyoda Precepts represent the essential philosophy of the founder of the Toyota Group, Sakichi everywhere through all of our activities. Toyoda, and are a source of spiritual support for Toyota employees. The spirit of the Toyota Precepts is 4. Create and develop advanced technologies and provide outstanding products and services that fulfill carried on in the Toyota Guiding Principles. the needs of customers worldwide. 5. Foster a corporate culture that enhances both individual creativity and the value of teamwork, while honoring mutual trust and respect between labor and management.

• Always be faithful to your duties, thereby contributing to the company and to the 6. Pursue growth through harmony with the global community via innovative management. overall good. 7. Work with business partners in research and manufacture to achieve stable, long-term growth and mutual benefits, while keeping ourselves open to new partnerships. • Always be studious and creative, striving to stay ahead of the times. • Always be practical and avoid frivolousness.

• Always strive to build a homelike atmosphere at work that is warm and friendly. CSR POLICY: Contribution Towards Sustainable Development • Always have respect for spiritual matters, and remember to be grateful at all times. We have compiled our Corporate Social Responsibility Policy: Contribution towards Sustainable Development, which interprets and explains the Toyota Guiding Principles by taking into consideration the relationship we have with our stakeholders. Our consolidated subsidiaries share this policy and act accordingly. Toyota’s business partners are also expected to support this policy and act in accordance with it. Toyota also participated in the formulation of and observes the standards outlined in the Charter of Corporate behavior of the Nippon Keidanren (Japan Business Federation), an alliance of Japanese leading corporations. Additional details available at Click HERE

TOYOTA ANNUAL REPORT 2011 29 0810 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

R&D and Intellectual Property Corporate Philosophy Management Team (As of June 17, 2011) Management Team Corporate Governance Risk Factors Other Management and Corporate Data

Toyota Motor Corporation (TMC) announced the modification of its management structure effective April 1, as part of its realization of the Toyota Global Vision. The changes are intended to create a structure that can meet the following objectives: 1) convey customer opinions and onsite information to management in a timely manner, 2) make prompt management decisions based on onsite information and 3) make constant checks as to whether management decisions are acceptable to society.

Changes to Management Structures

1. Streamlining of the Board of Directors 4. Building a structure that ensures that outside opinions are listened to in earnest and Effective following the formal decision made at the Board of Directors meeting held after the 107th reflected in management practices General Shareholders Meeting (June 17, 2011), the number of directors was reduced from 27 to 11. The For the management of regional entities, Toyota has established regional advisory committees Board of Directors is henceforth to comprise the chairman, the president, five executive vice presidents composed of well-informed persons in North America, Europe and Asia. This is meant to ensure that and the four officers responsible for the Corporate Planning, the Accounting Group and the External outside opinions are reflected in management practices for decision making that is in touch with work Affairs Group. sites and effective management decisions based on regional understanding.

2. Scaling down of the executive decision-making system 5. Promoting management in close contact with work sites Although previously the executive system was made up of three tiers—executive vice presidents, chief “Executive general manager” has been created as a non-executive position to promote management officers and officers responsible for group affairs—it has been streamlined to two, with the officers that is in close contact with work sites. Executive general managers are to be employees such as responsible for group affairs removed. The senior managing director position has been eliminated and grand chief engineers responsible for vehicle development, general managers responsible for the total number of executives broadly reduced, from 77 to 60. Also, chief officers will be appointed in technology and plant general managers. a flexible manner from the ranks of senior managing officers (a newly established rank) or managing officers.

3. Changes to structures to allow local decision making by overseas affiliates Regional chief officers, in principle, will be stationed in their respective regions, and the number of executives stationed outside Japan will be increased from 13 to 15. Their divisions’ functions, which are presently performed in Japan, will be transferred overseas in stages.

TOYOTA ANNUAL REPORT 2011 30 0810 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

R&D and Intellectual Property Corporate Philosophy Management Team (As of June 17, 2011) Management Team Corporate Governance Risk Factors Other Management and Corporate Data

Representative Directors Corporate Auditors

Chairman of the Board Executive Vice Presidents, Members of the Board Senior Managing Directors, Members of the Board Full-Time Corporate Auditors Corporate Auditors (Main operational responsibilities) (Chief officer, Deputy chief officer, General manager or Overseas subsidiary of residence)

Fujio Cho Takeshi Uchiyamada Nobuyori Kodaira Yoichiro Ichimaru Yoichi Morishita

Research & Development Corporate Planning Div. / Environmental Affairs Div. / IT Group

Yukitoshi Funo Mamoru Furuhashi Masaki Nakatsugawa Akishige Okada

Asia & Oceania Operations / External Affairs Group President, Member of the Board Middle East, Africa and Latin America Operations / External Affairs / Operation Planning and Support

Akio Toyoda Atsushi Niimi Takahiko Ijichi Masahiro Kato Kunihiro Matsuo

North America Operations / Accounting Group China Operations / Production Control / Production Engineering / Manufacturing

Shinichi Sasaki Yasumori Ihara Yoko Wake

Business Development / Corporate Planning Div. / IT / Purchasing / Purchasing Group Japan Sales Business / Customer Service / Quality

Satoshi Ozawa

Europe Operations / General Administration & Human Resources / Accounting

TOYOTA ANNUAL REPORT 2011 31 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

R&D and Intellectual Property Corporate Philosophy Corporate Governance Management Team Corporate Governance Risk Factors Other Management and Corporate Data

Toyota’s Basic Policy on Corporate Governance and corporate activities that reflect the views of various stakeholders, including the “Labor-Management Council,” the “Joint Labor-Management Round Table Conference” and the “Toyota Environment Committee.” Toyota has positioned the stable long-term growth of corporate value as a top-priority management issue. We believe that in carrying this out, it is essential that we achieve long-term and stable growth by building positive relationships with all stakeholders, including shareholders and customers as well as business partners, local communities and employees, and by supplying products that will satisfy our customers. This Accountability position is reflected in the “Guiding Principles at Toyota,” which is a statement of Toyota’s fundamental Toyota has engaged in timely and fair disclosure of corporate and financial information as stated in the CSR business policies. Also, Toyota adopted and presented the CSR Policy “Contribution toward Sustainable Policy “Contribution towards Sustainable Development.” In order to ensure the accurate, fair, and timely Development,” an interpretation of the “Guiding Principles at Toyota” that organizes the relationships with its disclosure of information, Toyota has established the Disclosure Committee chaired by an officer of the stakeholders. We are working to enhance corporate governance through a variety of measures designed to Accounting Division. The Committee holds regular meetings for the purpose of preparation, reporting and further increase our competitiveness as a global company. assessment of its annual securities report, quarterly report under the Financial Instruments and Exchange Law of Japan and Form 20-F under the U.S. Securities Exchange Act, and also holds extraordinary committee meetings from time to time whenever necessary. Toyota’s Corporate Governance System

Toyota formulated and announced the Toyota Global Vision in March 2011, based on what it has learned from the deterioration of the business environment following the Lehman Shock and a series of quality problems. Compliance The Toyota Global Vision, based on Toyota’s values that have guided Toyota since its founding, such as “Guiding Principles of Toyota” and “Toyota Way,” aims to exceed customer expectations by the development In order to manage and implement important activities for fulfilling social responsibilities, Toyota has of ever-better cars and enriching lives of societies, and to be rewarded with a smile which ultimately leads established the CSR Committee consisting of directors at the executive vice president level and above as to the stable base of business. Toyota is to keep this virtuous cycle by focusing on making ever-better cars. well as representatives of corporate auditors, to review important issues relating to corporate ethics, legal To fulfill the Toyota Global Vision, Toyota made some changes to its management structure such as compliance, risk management and social contribution, and also to develop action plans concerning these reducing the Board of Directors and decision making layers. Toyota will continue to offer products and issues. Toyota has also created a number of facilities for employees to make inquiries concerning compliance services that will satisfy evolving needs in every region. Toyota headquarters will provide overall direction matters, including the Compliance Hotline, which enables them to consult with an outside attorney, and and furnish support for the initiatives undertaken by the regional operations. takes measures to ensure that Toyota is aware of significant information concerning legal compliance as Specifically, with the aim of faster decision making, Toyota drastically reduced the number of Directors quickly as possible. Toyota will continue to promote the “Toyota Code of Conduct” which is a guideline for and abolished the position of Senior Managing Director. Furthermore, Toyota will replace the current three- employees’ behavior and conduct for employees of Toyota and its consolidated subsidiaries (together layer arrangement – Executive Vice President, Chief Officer, and Executive responsible for the operations “Toyota”) all around the world. Toyota will work to advance corporate ethics through training and education involved – with two layers, eliminating the executive immediately below the Chief Officer. Moving forward at all levels and in all departments. with this new structure will support a swifter flow of information from the divisional general managers, who Toyota has adopted an auditor system. Seven Corporate Auditors including four Outside Corporate are intimately familiar with their operations, to senior management. Auditors play a role in Toyota’s corporate governance efforts by undertaking audits in accordance with the Toyota is to enhance clarity in organizational responsibilities: the Board of Directors decides what Toyota audit policies and plans determined by the Board of Corporate Auditors. In addition, Toyota has secured the will do as global Toyota, and Chief Officers decide how to implement that decision as chief executives for personnel and framework supporting the audit by Corporate Auditors. The Outside Corporate Auditors day-to-day operations, etc. The post of Chief Officer will be filled either by a “Senior Managing Officer” or advise Toyota from a fair and neutral perspective, based on their broad experiences and insight in their “Managing Officer” in a flexible manner. Chief Officers responsible for the region or function conduct local respective fields of expertise. The state of internal controls and internal audits are reported to Corporate operations basically at respective sites under the Executive Vice President responsible for each operational Auditors (including Outside Corporate Auditors) through the Board of Corporate Auditors and the “CSR sector to vigorously reflect the voices of local customers in functions of R&D, production, and sales. Committee,” and the status of accounting audits is reported by independent External Auditors to the Corporate Auditors (including Outside Corporate Auditors) through the Board of Corporate Auditors. To enhance the system for internal audits, a specialized organization made independent of direct control by the Systems for Ensuring Appropriate Management management evaluates the effectiveness of the system to secure the appropriateness of documents regarding financial calculation and other information in accordance with Section 404 of the U.S. Sarbanes- Toyota has an “International Advisory Board” consisting of advisers from each region overseas, and, as Oxley Act and Article 24-4-4 (1) of the Financial Instruments and Exchange Law of Japan. In order to appropriate, receives advice on a wide range of management issues from a global perspective. In addition, enhance the reliability of the financial reporting of Toyota, the three auditing functions — audit by Corporate Toyota has a wide variety of conferences and committees for deliberations and the monitoring of management Auditors, internal audit, and accounting audit by Independent External Auditors — aid in conducting an

TOYOTA ANNUAL REPORT 2011 32 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

R&D and Intellectual Property Corporate Philosophy Corporate Governance Management Team Corporate Governance Risk Factors Other Management and Corporate Data

effective and efficient audit through meetings held periodically and as necessary to share information and 3) Toyota will appropriately discuss significant matters and measures relating to issues such as corporate come to understandings through discussion on audit plans and results. ethics, compliance, and risk management at the CSR Committee and other meetings. Toyota will also discuss and decide, at the meetings of various cross-sectional decision-making bodies, policies and systems to monitor and respond to risks relating to organizational function. Toyota’s Corporate Governance

Emphasizing Frontline Operation + Mulitidirectional Monitoring (2) System to retain and manage information relating to performance of duties by Directors Appointment Information relating to exercising duties by Directors shall be appropriately retained and managed by Shareholders each division in charge pursuant to the relevant internal rules and laws and regulations.

(3) Rules and systems related to the management of risk of loss 1) Toyota will properly manage the capital fund through its budgeting system and other forms of control, Board of Corporate Auditors International Advisory Board conduct business operations, and manage the budget, based on the authorities and responsibilities Majority are outside Board of Directors corporate auditors Labor-Management Council in accordance with the “Ringi” system (effective consensus-building and approval system) and other Joint Labor-Management Round Table Conference systems. Significant matters will be properly submitted and discussed at the Board of Directors’ meeting and other meetings of various bodies in accordance with the standards stipulated in the External Accounting Auditor CSR Committee* relevant rules. Audit for consolidated financial Senior Managing Officers statements and internal control or Managing Officers 2) Toyota will ensure accurate financial reporting by issuing documentation on the financial flow and the Toyota Environment Committee over financial reporting control system, etc., and by properly and promptly disclosing information through the Disclosure Committee. 3) Toyota will manage various risks relating to safety, quality, the environment, etc. and compliance by Internal * The CSR Committee deliberates on and makes decisions concerning CSR-related establishing coordinated systems with all regions, establishing rules or preparing and delivering Disclosure Committee Auditing Department planning, corporate ethics, legal compliance, Internal control systems risk management and social contribution manuals and by other means, as necessary through each relevant division. activities. 4) As a precaution against events such as natural disasters, Toyota will prepare manuals, conduct emergency drills, arrange risk diversification and insurance, etc., as needed.

Basic Approach to Internal Control System and Its Development (4) System to ensure that Directors exercise their duties efficiently 1) Toyota will manage consistent policies by specifying the policies at each level of the organization based Toyota, together with its subsidiaries, has created and maintained a sound corporate climate based on the on the medium- to long-term management policies and the Company’s policies for each fiscal term. “Guiding Principles at Toyota” and the “Toyota Code of Conduct.” Toyota integrates the principles of problem 2) The Directors will promptly determine the management policies based on precise on-the-spot identification and continuous improvement into its business operation process and makes continuous efforts information and, in accordance with Toyota’s advantageous “field-oriented” approach, delegate a to train employees who will put these principles into practice. high level of authority to Chief Officers (Senior Managing Officers and Managing Officers) who take Accordingly, Toyota has developed its basic policy regarding the following items as stipulated in the responsibility for business operations in each region and function. The Chief Officers will proactively Corporation Act: compose business plans for the regions and functions under their leadership and execute them in a swift and timely manner in order to carry out Toyota’s management policies. The Directors will supervise (1) System to ensure that the Directors execute their responsibilities in compliance with the execution of duties by the Chief Officers. relevant laws and regulations and the Articles of Incorporation 3) Toyota, from time to time, will make opportunities to listen to the opinions of various stakeholders, 1) Toyota will ensure that Directors act in compliance with relevant laws and regulations and the Articles including external experts in each region, and reflect those opinions in Toyota’s management and of Incorporation, based on the Code of Ethics and other explanatory documents that include necessary corporate activities. legal information, presented on occasions such as trainings for new Directors. 2) Toyota will make decisions regarding business operations after comprehensive discussions at the (5) System to ensure that employees conduct business in compliance with relevant laws and Board of Directors’ meeting and other meetings of various cross-sectional decision-making bodies. regulations and the Articles of Incorporation Matters to be decided are properly submitted and discussed at the meetings of those decision- 1) Toyota will clarify the responsibilities of each organization unit and maintain a basis to ensure continuous making bodies in accordance with the relevant rules. improvements in the system.

TOYOTA ANNUAL REPORT 2011 33 0722 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

R&D and Intellectual Property Corporate Philosophy Corporate Governance Management Team Corporate Governance Risk Factors Other Management and Corporate Data

2) Toyota will continuously review the legal compliance and risk management framework to ensure Basic Policy and Preparation towards the Elimination of Antisocial Forces effectiveness. For this purpose, each organization unit shall confirm the effectiveness by conducting (1) Establishment of divisions overseeing measures against antisocial forces and posts in charge of self-checks among others, and report the result to the CSR Committee and other committees. preventing undue claims 3) Toyota will promptly obtain information regarding legal compliance and corporate ethics and respond Toyota established divisions that oversee measures against antisocial forces (“Divisions Overseeing to problems and questions related to compliance through its corporate ethics inquiry office and other Measures Against Antisocial Forces”) in its major offices as well as assigned persons in charge of channels. preventing undue claims. Toyota also established a system whereby undue claims, organized violence and criminal activities conducted by antisocial forces are immediately reported to and consulted with (6) System to ensure the appropriateness of business operations of the corporation and the business group consisting of the parent company and subsidiaries Divisions Overseeing Measures Against Antisocial Forces. 1) Toyota will expand the “Guiding Principles at Toyota” and the “Toyota Code of Conduct” to its (2) Liaising with specialist organizations subsidiaries as Toyota’s common charter of conduct, and develop and maintain a sound environment Toyota has been strengthening its liaison with specialist organizations by joining liaison committees of internal controls for Toyota. Toyota will also promote the “Guiding Principles at Toyota” and the organized by specialists such as the police. It has also been receiving guidance on measures to be “Toyota Code of Conduct” through personnel exchanges. taken against antisocial forces from such committees. 2) Toyota will manage its subsidiaries in a comprehensive manner appropriate to their positioning by clarifying the roles of the division responsible for the subsidiaries’ financing and management and the (3) Collecting and managing information concerning antisocial forces roles of the division responsible for the subsidiaries’ business activities. Those divisions will confirm By liaising with experts and the police, Divisions Overseeing Measures Against Antisocial Forces share the appropriateness and legality of the operations of the subsidiaries by exchanging information with up-to-date information on antisocial forces and utilize such information to call Toyota’s employees’ those subsidiaries, periodically and as needed. attention to antisocial forces.

(7) System concerning employees who assist the Corporate Auditors when required (4) Preparation of manuals Toyota will establish a Corporate Auditors Department and assign a number of full-time staff to support Toyota compiles cases concerning measures against antisocial forces and distributes them to each this function. department within Toyota.

(8) Independence of the employees described in the preceding item (7) from Directors (5) Training activities Any changes in personnel in the Corporate Auditors Department will require prior consent of the Board Toyota promotes training activities to prevent damages caused by antisocial forces by sharing information of Corporate Auditors or a full-time Corporate Auditor selected by the Board of Corporate Auditors. on antisocial forces within the company as well as holding lectures at Toyota and its group companies. (9) System for Directors and employees to report to Corporate Auditors, and other related systems 1) Directors, from time to time, will properly report to the Corporate Auditors any major business operations through the divisions in charge. If any fact that may cause significant damage to the Company is discovered, they will report the matter to the Corporate Auditors immediately. 2) Directors, Senior Managing Officers, Managing Officers, and employees will report to Corporate Auditors on the business upon requests by the Corporate Auditors, periodically and as needed.

(10) Other systems to ensure that the Corporate Auditors conducted audits effectively Toyota will ensure that the Corporate Auditors attend major Board of Directors’ meetings, inspect important Company documents, and make opportunities to exchange information between the Corporate Auditors and Accounting Auditor periodically and as needed, as well as appoint external experts.

TOYOTA ANNUAL REPORT 2011 34 0725 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

R&D and Intellectual Property Corporate Philosophy Risk Factors Management Team Corporate Governance Risk Factors Other Management and Corporate Data

Operational and other risks faced by Toyota that could significantly influence the decisions of Industry and Business Risks investors are set out below. However, the following does not encompass all risks related to the The worldwide automotive market is highly competitive. operations of Toyota. There are risk factors other than those given below. Any such risk factors The worldwide automotive market is highly competitive. Toyota faces intense competition from automotive could influence the decisions of investors. The forward-looking statements included below are manufacturers in the markets in which it operates. Although the global economy is gradually recovering, based on information available as of June 24, 2011, the filing date of Form 20-F. competition in the automotive industry has further intensified amidst difficult overall market conditions. In addition, competition is likely to further intensify in light of further continuing globalization in the worldwide automotive industry, possibly resulting in further industry reorganization. Factors affecting competition Risks relating to the Great East Japan Earthquake include product quality and features, safety, reliability, fuel economy, the amount of time required for innovation and development, pricing, customer service and financing terms. Increased competition may Toyota may be adversely affected by the continuing effects of the Great East Japan Earthquake and lead to lower vehicle unit sales, which may result in a further downward price pressure and adversely affect ensuing events. Toyota’s financial condition and results of operations. Toyota’s ability to adequately respond to the recent The Japanese economy as a whole suffered significant damage as a result of the Great East Japan rapid changes in the automotive market and to maintain its competitiveness will be fundamental to its future Earthquake that occurred on March 11, 2011 and the ensuing tsunami and accidents at nuclear power success in existing and new markets and to maintain its market share. There can be no assurances that plants in Fukushima Prefecture (collectively, the “Great East Japan Earthquake”). Toyota will be able to compete successfully in the future. After the earthquake’s occurrence on March 11, 2011, Toyota temporarily suspended operations at all of its domestic factories due to damage to social infrastructure including energy supply, transportation systems, The worldwide automotive industry is highly volatile. gas, water and communication systems caused by the earthquake, shortages of parts from suppliers, and Each of the markets in which Toyota competes has been subject to considerable volatility in demand. damage sustained by some subsidiaries of Toyota in regions adjacent to the disaster zone. On March 18, Demand for vehicles depends to a large extent on social, political and economic conditions in a given 2011, Toyota began resuming production in stages. As of April 18, 2011, Toyota had resumed operations at market and the introduction of new vehicles and technologies. As Toyota’s revenues are derived from sales all domestic factories. As of the date of this annual report, production levels at both domestic and overseas in markets worldwide, economic conditions in such markets are particularly important to Toyota. During factories vary by region and vehicle type and, primarily due to shortages of supplies from external suppliers, fiscal 2010, although government efforts to stimulate demand in Japan, North America and Europe, which production is not yet normalized at some factories. Toyota anticipates that its factories will reach normal are Toyota’s main markets, resulted in a trend towards economic recovery, market conditions in those areas operational capacity between November and December 2011, but there is no assurance that production will remained difficult, and Toyota was adversely affected by changes in the market structure with further shifts normalize by that time. Also, in May 2011, operations at the nuclear power plant in Shizuoka Prefecture that in consumer demand to compact and low-priced vehicles. Such weakness in demand for automobiles and supplied a portion of the electricity to the area where Toyota’s global headquarters and main plants are changes in market structure is continuing, and it is unclear how this situation will transition in the future. located were suspended in light of the damage sustained by the Fukushima nuclear power plant. There is Toyota’s financial condition and results of operations may be adversely affected if the weakness in demand concern regarding potential shortages of electricity during the demanding summer months, and such a for automobiles and changes in market structure continue or progress further. Demand may also be affected shortage could negatively impact Toyota’s production. The Great East Japan Earthquake has negatively by factors directly impacting vehicle price or the cost of purchasing and operating vehicles such as sales impacted Toyota’s operations and the duration and magnitude of the impact ensuing from it remain unclear. and financing incentives, prices of raw materials and parts and components, cost of fuel and governmental Depending on developments, the impact on Toyota’s results of operations and financial condition may be regulations (including tariffs, import regulation and other taxes). Volatility in demand may lead to lower significant. vehicle unit sales, which may result in a further downward price pressure and adversely affect Toyota’s The Japanese economy has been negatively impacted by damage caused by the Great East Japan financial condition and results of operations. Earthquake, costs associated to rebuild the affected areas and interrupted infrastructure, including energy shortages. The duration and magnitude of the total impact on the Japanese economy are unclear. In addition, Toyota’s future success depends on its ability to offer new innovative competitively priced products the nuclear power plants in Fukushima Prefecture are not yet fully under control and the resolution of the that meet customer demand on a timely basis. situation at these plants, including timing, remains unclear. Continuing radiation leakage and further Meeting customer demand by introducing attractive new vehicles and reducing the amount of time required aggravation of the nuclear power plants are possible. These various issues in connection with the Great East for product development are critical to automotive manufacturers. In particular, it is critical to meet customer Japan Earthquake may cause significant and unforeseeable adverse effects on the Japanese economy, demand with respect to quality, safety and reliability. The timely introduction of new vehicle models, at Toyota’s operations, and demand for Toyota’s products. competitive prices, meeting rapidly changing customer preferences and demand is more fundamental to Toyota’s success than ever, as the automotive market is rapidly transforming in light of the changing global economy. There is no assurance, however, that Toyota will adequately and appropriately respond to changing customer preferences and demand with respect to quality, safety, reliability, styling and other features in a timely manner. Even if Toyota succeeds in perceiving customer preferences and demand, there is no

TOYOTA ANNUAL REPORT 2011 35 0725 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

R&D and Intellectual Property Corporate Philosophy Risk Factors Management Team Corporate Governance Risk Factors Other Management and Corporate Data

assurance that Toyota will be capable of developing and manufacturing new, price competitive products in The worldwide financial services industry is highly competitive. a timely manner with its available technology, intellectual property, sources of raw materials and parts and The worldwide financial services industry is highly competitive. Increased competition in automobile components, and production capacity, including cost reduction capacity. Further, there is no assurance that financing may lead to decreased margins. A decline in Toyota’s vehicle unit sales, an increase in residual Toyota will be able to implement capital expenditures at the level and times planned by management. value risk due to lower used vehicle price, an increase in the ratio of credit losses and increased funding Toyota’s inability to develop and offer products that meet customers’ preferences and demand with respect costs are factors which may impact Toyota’s financial services operations. If Toyota is unable to adequately to quality, safety, reliability, styling and other features in a timely manner could result in a lower market share respond to the changes and competition in automobile financing, Toyota’s financial services operations may and reduced sales volumes and margins, and may adversely affect Toyota’s financial condition and results adversely affect its financial condition and results of operations. of operations.

Toyota’s ability to market and distribute effectively is an integral part of Toyota’s successful sales. Financial Market and Economic Risks Toyota’s success in the sale of vehicles depends on its ability to market and distribute effectively based on distribution networks and sales techniques tailored to the needs of its customers. There is no assurance that Toyota’s operations are subject to currency and interest rate fluctuations. Toyota will be able to develop sales techniques and distribution networks that effectively adapt to changing Toyota is sensitive to fluctuations in foreign currency exchange rates and is principally exposed to fluctuations customer preferences or changes in the regulatory environment in the major markets in which it operates. in the value of the Japanese yen, the U.S. dollar and the euro and, to a lesser extent, the Australian dollar, Toyota’s inability to maintain well-developed sales techniques and distribution networks may result in the Canadian dollar and the British pound. Toyota’s consolidated financial statements, which are presented decreased sales and market share and may adversely affect its financial condition and results of operations. in Japanese yen, are affected by foreign currency exchange fluctuations through both translation risk and transaction risk. Changes in foreign currency exchange rates may affect Toyota’s pricing of products sold Toyota’s success is significantly impacted by its ability to maintain and develop its brand image. and materials purchased in foreign currencies. In particular, strengthening of the Japanese yen against the In the highly competitive automotive industry, it is critical to maintain and develop a brand image. In order to U.S. dollar can have an adverse effect on Toyota’s operating results. The Japanese yen has been appreciating maintain and develop a brand image, it is necessary to further increase customers’ confidence by providing against major currencies including the U.S. dollar in the past year. If the Japanese yen continues to appreciate safe, high-quality products that meet customer preferences and demand. If Toyota is unable to effectively against major currencies, including the U.S. dollar, Toyota’s financial condition and results of operations may maintain and develop its brand image as a result of its inability to provide safe, high-quality products or as be adversely affected. result of the failure to promptly implement safety measures such as recalls when necessary, vehicle unit Toyota believes that its use of certain derivative financial instruments including interest rate swaps and sales and/or sale prices may decrease, and as a result revenues and profits may not increase as expected increased localized production of its products have reduced, but not eliminated, the effects of interest rate or may decrease, adversely affecting its financial condition and results of operations. and foreign currency exchange rate fluctuations. Nonetheless, a negative impact resulting from fluctuations in foreign currency exchange rates and changes in interest rates may adversely affect Toyota’s financial Toyota relies on suppliers for the provision of certain supplies including parts, condition and results of operations. components and raw materials. Toyota purchases supplies including parts, components and raw materials from a number of external High prices of raw materials and strong pressure on Toyota’s suppliers could negatively impact suppliers located around the world. For some supplies, Toyota relies on a single supplier or a limited number Toyota’s profitability. of suppliers, whose replacement with another supplier may be difficult. Inability to obtain supplies from a Increases in prices for raw materials that Toyota and Toyota’s suppliers use in manufacturing their products single or limited source supplier may result in difficulty obtaining supplies and may restrict Toyota’s ability to or parts and components such as steel, precious metals, non-ferrous alloys including aluminum, and plastic produce vehicles. Furthermore, even if Toyota were to rely on a large number of suppliers, first-tier suppliers parts, may lead to higher production costs for parts and components. This could, in turn, negatively impact with whom Toyota directly transacts may in turn rely on a single second-tier supplier or limited second-tier Toyota’s future profitability because Toyota may not be able to pass all those costs on to its customers or suppliers. Toyota’s ability to continue to obtain supplies from its suppliers in a timely and cost-effective require its suppliers to absorb such costs. manner is subject to a number of factors, some of which are not within Toyota’s control. These factors include the ability of Toyota’s suppliers to provide a continued source of supply, and Toyota’s ability to The downturn in the financial markets could adversely affect Toyota’s ability to raise capital. effectively compete and obtain competitive prices from suppliers. A loss of any single or limited source Should the world economy suddenly deteriorate, a number of financial institutions and investors will face supplier or inability to obtain supplies from suppliers in a timely and cost-effective manner could lead to difficulties in providing capital to the financial markets at levels corresponding to their own financial capacity, increased costs or delays or suspensions in Toyota’s production and deliveries, which could have an adverse and, as a result, there is a risk that companies may not be able to raise capital under terms that they would effect on Toyota’s financial conditions and results of operations. expect to receive with their creditworthiness. If Toyota is unable to raise the necessary capital under appropriate conditions on a timely basis, Toyota’s financial condition and results of operations may be adversely affected.

TOYOTA ANNUAL REPORT 2011 36 0725 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

R&D and Intellectual Property Corporate Philosophy Risk Factors Management Team Corporate Governance Risk Factors Other Management and Corporate Data

Political, Regulatory, Legal and Other Risks

The automotive industry is subject to various governmental regulations. The worldwide automotive industry is subject to various laws and governmental regulations including those related to vehicle safety and environmental matters such as emission levels, fuel economy, noise and pollution. In particular, automotive manufacturers such as Toyota are required to implement safety measures such as recalls for vehicles that do not or may not comply with the safety standards of laws and governmental regulations. In addition, Toyota may, in order to reassure its customers of the safety of Toyota’s vehicles, decide to voluntarily implement recalls or other safety measures even if the vehicle complies with the safety standards of relevant laws and governmental regulations. Many governments also impose tariffs and other trade barriers, taxes and levies, or enact price or exchange controls. Toyota has incurred, and expects to incur in the future, significant costs in complying with these regulations. If Toyota launches products that result in safety measures such as recalls, Toyota may incur various costs including significant costs for free repairs. Furthermore, new legislation or changes in existing legislation may also subject Toyota to additional expenses in the future. If Toyota incurs significant costs related to implementing safety measures or meeting laws and governmental regulations, Toyota’s financial condition and results of operations may be adversely affected.

Toyota may become subject to various legal proceedings. As an automotive manufacturer, Toyota may become subject to legal proceedings in respect of various issues, including product liability and infringement of intellectual property. Toyota may also be subject to legal proceedings brought by its shareholders and governmental proceedings and investigations. Toyota is in fact currently subject to a number of pending legal proceedings and government investigations. A negative outcome in one or more of these pending legal proceedings could adversely affect Toyota’s financial condition and results of operations.

Toyota may be adversely affected by natural calamities, political and economic instability, fuel shortages or interruptions in social infrastructure, wars, terrorism and labor strikes. Toyota is subject to various risks associated with conducting business worldwide. These risks include natural calamities; political and economic instability; fuel shortages; interruption in social infrastructure including energy supply, transportation systems, gas, water, or communication systems resulting from natural hazards or technological hazards; wars; terrorism; labor strikes and work stoppages. Should the major markets in which Toyota purchases materials, parts and components and supplies for the manufacture of Toyota products or in which Toyota’s products are produced, distributed or sold be affected by any of these events, it may result in disruptions and delays in the operations of Toyota’s business. Should significant or prolonged disruptions or delays related to Toyota’s business operations occur, it may adversely affect Toyota’s financial condition and results of operations.

TOYOTA ANNUAL REPORT 2011 37 0819 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

R&D and Intellectual Property Corporate Philosophy Other Management and Corporate Data Management Team Corporate Governance Risk Factors Other Management and Corporate Data

Please Click below to access the contents.

Chronology Research & Development Operations in Japan Worldwide Operations

History of Toyota Domestic and Overseas R&D Sites Toyota Group Organizations Overseas Manufacturing Companies

North America/Latin America: Japanese Production and Dealer Sites Market/Toyota Sales and Production

Product Lineup Technological Development Number of Vehicles Produced Europe/Africa: in Japan by Model Market/Toyota Sales and Production

History of Technological Number of Vehicles Registered Asia: Product Lineup Development from 1990 in Japan by Model Market/Toyota Sales and Production

Oceania & Middle East: Market/Toyota Sales and Production

Vehicle Production, Sales and Exports by Region

Overseas Model Lineup by Country & Region

TOYOTA ANNUAL REPORT 2011 38 0729 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Message from the Executive Vice President Responsible for Accounting

strong efforts into marketing, as well as work to achieve cost reductions Fiscal 2011 Business Results by holding down fixed costs and conducting companywide VA efforts so as to improve our profitability. On a consolidated basis for the fiscal year ended March 31, 2011, year-on-year vehicle sales improved 71 thousand units to 7,308 thousand units, and net revenues increased 0.2% to ¥18,993.6 billion. Operating income rose ¥320.7 billion to ¥468.2 billion, whereas net income Consolidated Financial Forecasts for Fiscal 2012 advanced ¥198.7 billion to ¥408.1 billion. As a result, Toyota succeeded in increasing both revenue and income. For the fiscal year ending March 31, 2012, we forecast vehicle sales of Factors contributing to the increase in operating income included 7.24 million units, net revenues of ¥18,600.0 billion, operating income of ¥490.0 billion from marketing efforts (including ¥130.0 billion from our ¥300.0 billion and net income of ¥280.0 billion on a consolidated basis. financial services operations) and ¥180.0 billion from our continuous The exchange rates assumed for this forecast are ¥82 per US$1 and cost-reduction efforts, including companywide VA (Value Analysis) ¥115 per €1. activities. Major factors reducing income were exchange rate fluctua- Factors that are expected to increase income include cost-reduction tions, amounting to ¥290.0 billion, increases in expenses, etc., of ¥30.0 efforts amounting to ¥100.0 billion. Factors that are expected to cause a billion, and other factors reducing income that amounted to ¥29.3 billion. decrease in income include the effect of exchange rate fluctuations In Japan, subsidies for eco-car purchases ended, which had a negative amounting to ¥100.0 billion, sales volume/mix effects totaling ¥120.0 effect on income, and vehicle sales were drastically down due to the billion and an increase in expenses, etc., reaching ¥48.2 billion. In terms earthquake of March 11. Nonetheless, sales of IMVs were strong, of the impact in the next fiscal year of the Great East Japan Earthquake, especially in Asian countries such as Thailand and Indonesia, reaching we expect a decrease in unit sales, including a surplus after recovery to their highest levels ever for the full year and contributing to an increase regular production levels amounting to ¥320.0 billion and decreased cost in income. The negative impact of the Great East Japan Earthquake on reduction amounting to ¥40.0 billion, for a total impact of ¥360.0 billion. income amounted to ¥110.0 billion: ¥100.0 billion was due to operating Despite temporary factors such as the effect of the disaster, I believe we factors such as reduced vehicle sales as a result of reduced production are making steady progress toward achieving the goal set forth in our and the recording of allowances for our financial services business; other Global Vision of building solid profitability by which we can consistently factors contributing to a ¥10.0 billion reduction in income were decreased achieve a return to profitability in nonconsolidated operating income, cost reduction associated with lower unit sales and an increase in costs. with a consolidated operating margin of 5% and operating income of Taking the above into consideration, we view the increase in income for around ¥1 trillion even under such severe conditions as an exchange the fiscal year ended March 31, 2011, as offsetting two major impacts rate of ¥85 to the U.S. dollar, and consolidated unit sales of 7.5 million. that reduced income, namely, the rapid and steep increase in the value I believe that the profitability called for in the Global Vision represents of the yen and the Great East Japan Earthquake. a “bottom line for sustainable growth,” which means creating a structure Although I have noted previously that in the fiscal year ended March that will generate earnings even in the event of another economic 31, 2010, we succeeded in broadly lowering our break-even point, we downturn that, for example, results in a 20% decline in unit sales. Doing continued to make structural improvements during the fiscal year ended so means creating a stable business base by creating “better cars” that March 31, 2011, so if we leave out temporary factors such as the impact are accepted by our customers and society, and contributing to “enriching of the earthquake, I believe we have succeeded in creating “a structure lives of communities,” which will result in winning the hearts of a growing that generates profits even with the exchange rate at ¥85 to the U.S. number of customers. By fostering that kind of virtuous cycle we can dollar, and consolidated unit sales of 6.6 million.” We will continue to put realize sustainable growth and increase our corporate value.

TOYOTA ANNUAL REPORT 2011 39 0729 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Message from the Executive Vice President Responsible for Accounting

Financial Strategy Dividends and Share Acquisitions

The three key components of Toyota’s financial strategy are growth, efficiency and stability. We consider benefiting shareholders one of our top management priorities and make an effort to realize We believe that the balanced pursuit of these three priorities over the medium to long term will allow sustainable growth through ongoing structural improvements to enhance our corporate value. We strive for us to achieve steady and sustainable growth, as well as increase corporate value. the continuous and stable payment of dividends while giving due consideration to factors such as the business results in each term, investment plans and cash reserves. Growth: Sustainable growth through continuous forward-looking investments To survive amid tough competition, we will utilize our internal funds for the early commercialization of We believe that automotive markets worldwide will grow over the medium to long term. As they expand, the next-generation environmental and safety technologies that prioritize customer safety and confidence. center of market growth will shift toward fuel-efficient vehicles, such as hybrid vehicles and compact vehicles, Accordingly, we declared an annual dividend payment of ¥50 per share for the fiscal year ended March 31, and toward resource-rich and emerging markets. We plan to invest actively and efficiently in these areas to 2011, an increase of ¥5 per share over the previous year’s annual dividend. respond to structural shifts in demand and ensure long-term sustainable growth. We will expand our lineup Given the uncertain outlook for the present business environment, we will prioritize securing cash of hybrids and other eco-cars and develop it globally, while making efforts to increase sales in emerging reserves. Accordingly, we did not repurchase our own shares in the fiscal year ended March 31, 2011, and markets by working to strengthen locally produced core models, such as IMVs and newly developed we plan to forgo such repurchases for the foreseeable future. subcompact models. I believe we should work to realize a geographically balanced business structure that We will continue striving to further improve profits and meet the expectations of our shareholders. favors neither developed nor emerging economies. July 2011 Efficiency: Improving profitability and capital efficiency To meet ongoing demand for hybrid and compact vehicles, we aim to provide high quality vehicles at affordable prices and to improve profitability through further cost reductions. We will continue to slim down our plant and equipment investment through the effective use of existing facilities and reducing Satoshi Ozawa, changeover costs that arise as a result of model changes. Our goal is to achieve the same effect from Executive Vice President minimized capital expenditures as we did when they were at their peak. Through such efforts, we will seek effective investment that emphasizes eco-cars and emerging markets while improving our income structure.

Stability: Maintaining a solid financial base We preserve a solid financial base by ensuring sufficient liquidity and stable shareholders’ equity. Such a sound financial position enables us to maintain a level of capital expenditures and investment in research and development geared towards future growth as well as to maintain the necessary level of working capital, even during difficult business environments such as steep price increases in raw materials or a Net Revenues Operating Income Vehicle Sales by Region drastic foreign exchange rate fluctuation, not to mention such unexpected crises as the recent natural disaster. In view of anticipated medium to long-term growth in automotive markets worldwide, we believe (¥ Billion) (¥ Billion) 25,000 2,500 that maintaining adequate liquidity is essential for the implementation of forward-looking investment to 2,000 improve products and develop next-generation technologies, as well as to establish a structure for produc- 20,000 tion and sales in both the Japanese and overseas markets in addition to the crisis measures. We will 1,500 15,000 continue to pursue further capital efficiency and improved cash flows. 1,000

10,000 500

0 Japan 26.2 % 5,000 North America 27.8 % -500 Europe 10.9 % 0 Asia 17.2 % FY ‘07 ‘10‘09‘08 ‘11 FY ‘07 ‘10‘09‘08 ‘11 Others 17.9 %

TOYOTA ANNUAL REPORT 2011 40 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Selected Financial Summary (U.S. GAAP)

Toyota Motor Corporation Fiscal years ended March 31

Yen in millions 2002 2003 2004 2005 2006 For the Year: Net Revenues: Sales of Products ¥13,499,644 ¥14,793,973 ¥16,578,033 ¥17,790,862 ¥20,059,493 Financing Operations 690,664 707,580 716,727 760,664 977,416 Total ¥14,190,308 ¥15,501,553 ¥17,294,760 ¥18,551,526 ¥21,036,909

Costs and Expenses: Cost of Products Sold ¥10,874,455 ¥11,914,245 ¥13,506,337 ¥14,500,282 ¥16,335,312 Cost of Financing Operations 459,195 423,885 364,177 369,844 609,632 Selling, General and Administrative 1,763,026 1,891,777 1,757,356 2,009,213 2,213,623 Total ¥13,096,676 ¥14,229,907 ¥15,627,870 ¥16,879,339 ¥19,158,567 Operating Income (Loss) ¥ 1,093,632 ¥ 1,271,646 ¥ 1,666,890 ¥ 1,672,187 ¥ 1,878,342 % of Net Revenues 7.7% 8.2% 9.6% 9.0% 8.9% Income (Loss) before Income Taxes and Equity in Earnings of Affiliated Companies 972,101 1,226,652 1,765,793 1,754,637 2,087,360 Provision for Income Taxes 422,789 517,014 681,304 657,910 795,153 Net Income (Loss) attributable to Toyota Motor Corporation 556,567 750,942 1,162,098 1,171,260 1,372,180 ROE 7.8% 10.4% 15.2% 13.6% 14.0% Net Cash Provided by Operating Activities ¥ 1,532,079 ¥ 1,940,088 ¥ 2,186,734 ¥ 2,370,940 ¥ 2,515,480 Net Cash Used in Investing Activities (1,810,230) (2,001,448) (2,216,495) (3,061,196) (3,375,500) Net Cash Provided by (Used in) Financing Activities 392,148 37,675 242,223 419,384 876,911 R&D Expenses 589,306 668,404 682,279 755,147 812,648 Capital Expenditures for Property, Plant and Equipment* 940,547 1,005,931 945,803 1,068,287 1,523,459 Depreciation 809,841 870,636 969,904 997,713 1,211,178 At Year-End: Toyota Motor Corporation Shareholders’ Equity ¥ 7,264,112 ¥ 7,121,000 ¥ 8,178,567 ¥ 9,044,950 ¥10,560,449 Total Assets 19,305,730 20,152,974 22,040,228 24,335,011 28,731,595 Long-Term Debt 3,722,706 4,137,528 4,247,266 5,014,925 5,640,490 Cash and Cash Equivalents 1,657,160 1,592,028 1,729,776 1,483,753 1,569,387 Ratio of Toyota Motor Corporation Shareholders’ Equity 37.6% 35.3% 37.1% 37.2% 36.8%

Yen 2002 2003 2004 2005 2006 Per Share Data: Net Income (Loss) attributable to Toyota Motor Corporation (Basic) ¥ 152.26 ¥ 211.32 ¥ 342.90 ¥ 355.35 ¥ 421.76 Annual Cash Dividends 28 36 45 65 90 Toyota Motor Corporation Shareholders’ Equity 2,015.82 2,063.43 2,456.08 2,767.67 3,257.63 Stock Information (March 31): Stock Price ¥ 3,650 ¥ 2,635 ¥ 3,880 ¥ 3,990 ¥ 6,430 Market Capitalization (Yen in millions) ¥13,332,491 ¥ 9,512,343 ¥14,006,790 ¥14,403,890 ¥23,212,284 Number of Shares Issued (shares) · 3,649,997,492 3,609,997,492 3,609,997,492 3,609,997,492 3,609,997,492

* Excluding vehicles and equipment of operating leases

TOYOTA ANNUAL REPORT 2011 41 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Selected Financial Summary (U.S. GAAP)

Toyota Motor Corporation Fiscal years ended March 31

Yen in millions % change 2007 2008 2009 2010 2011 2011 vs. 2010 For the Year: Net Revenues: Sales of Products ¥22,670,097 ¥24,820,510 ¥19,173,720 ¥17,724,729 ¥17,820,520 +0.5 Financing Operations 1,277,994 1,468,730 1,355,850 1,226,244 1,173,168 −4.3 Total ¥23,948,091 ¥26,289,240 ¥20,529,570 ¥18,950,973 ¥18,993,688 +0.2 Costs and Expenses: Cost of Products Sold ¥18,356,255 ¥20,452,338 ¥17,468,416 ¥15,971,496 ¥15,985,783 +0.1 Cost of Financing Operations 872,138 1,068,015 987,384 712,301 629,543 −11.6 Selling, General and Administrative 2,481,015 2,498,512 2,534,781 2,119,660 1,910,083 −9.9 Total ¥21,709,408 ¥24,018,865 ¥20,990,581 ¥18,803,457 ¥18,525,409 −1.5 Operating Income (Loss) ¥ 2,238,683 ¥ 2,270,375 ¥ (461,011) ¥ 147,516 ¥ 468,279 +217.4 % of Net Revenues 9.3% 8.6% −2.2% 0.8% 2.5% — Income (Loss) before Income Taxes and Equity in Earnings of Affiliated Companies 2,382,516 2,437,222 (560,381) 291,468 563,290 +93.3 Provision for Income Taxes 898,312 911,495 (56,442) 92,664 312,821 +237.6 Net Income (Loss) attributable to Toyota Motor Corporation 1,644,032 1,717,879 (436,937) 209,456 408,183 +94.9 ROE 14.7% 14.5% −4.0% 2.1% 3.9% — Net Cash Provided by Operating Activities ¥ 3,238,173 ¥ 2,981,624 ¥ 1,476,905 ¥ 2,558,530 ¥ 2,024,009 −20.9 Net Cash Used in Investing Activities (3,814,378) (3,874,886) (1,230,220) (2,850,184) (2,116,344) — Net Cash Provided by (Used in) Financing Activities 881,768 706,189 698,841 (277,982) 434,327 — R&D Expenses 890,782 958,882 904,075 725,345 730,340 +0.7 Capital Expenditures for Property, Plant and Equipment* 1,425,814 1,480,570 1,364,582 604,536 629,326 +4.1 Depreciation 1,382,594 1,491,135 1,495,170 1,414,569 1,175,573 −16.9 At Year-End: Toyota Motor Corporation Shareholders’ Equity ¥11,836,092 ¥11,869,527 ¥10,061,207 ¥10,359,723 ¥10,332,371 −0.3 Total Assets 32,574,779 32,458,320 29,062,037 30,349,287 29,818,166 −1.8 Long-Term Debt 6,263,585 5,981,931 6,301,469 7,015,409 6,449,220 −8.1 Cash and Cash Equivalents 1,900,379 1,628,547 2,444,280 1,865,746 2,080,709 +11.5 Ratio of Toyota Motor Corporation Shareholders’ Equity 36.3% 36.6% 34.6% 34.1% 34.7% —

Yen % change 2007 2008 2009 2010 2011 2011 vs. 2010 Per Share Data: Net Income (Loss) attributable to Toyota Motor Corporation (Basic) ¥ 512.09 ¥ 540.65 ¥ (139.13) ¥ 66.79 ¥ 130.17 +94.9 Annual Cash Dividends 120 140 100 45 50 +11.1 Toyota Motor Corporation Shareholders’ Equity 3,701.17 3,768.97 3,208.41 3,303.49 3,295.08 −0.3 Stock Information (March 31): Stock Price ¥ 7,550 ¥ 4,970 ¥ 3,120 ¥ 3,745 ¥ 3,350 −10.5 Market Capitalization (Yen in millions) ¥27,255,481 ¥17,136,548 ¥10,757,752 ¥12,912,751 ¥11,550,792 −10.5 Number of Shares Issued (shares) 3,609,997,492 3,447,997,492 3,447,997,492 3,447,997,492 3,447,997,492 —

* Excluding vehicles and equipment of operating leases

TOYOTA ANNUAL REPORT 2011 42 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Segment Information

Toyota Motor Corporation Fiscal years ended March 31

Yen in millions % change 2006 2007 2008 2009 2010 2011 2011 vs. 2010

Business Segment: Net Revenues: Automotive ¥19,338,144 ¥21,928,006 ¥24,177,306 ¥18,564,723 ¥17,197,428 ¥17,337,320 +0.8 Financial Services 996,909 1,300,548 1,498,354 1,377,548 1,245,407 1,192,205 −4.3 All Other 1,190,291 1,323,731 1,346,955 1,184,947 947,615 972,252 +2.6 Intersegment Elimination (488,435) (604,194) (733,375) (597,648) (439,477) (508,089) — Consolidated ¥21,036,909 ¥23,948,091 ¥26,289,240 ¥20,529,570 ¥18,950,973 ¥18,993,688 +0.2

Operating Income (Loss): Automotive ¥ 1,694,045 ¥ 2,038,828 ¥ 2,171,905 ¥ (394,876) ¥ (86,370) ¥ 85,973 — Financial Services 155,817 158,495 86,494 (71,947) 246,927 358,280 +45.1 All Other 39,748 39,679 33,080 9,913 (8,860) 35,242 — Intersegment Elimination (11,268) 1,681 (21,104) (4,101) (4,181) (11,216) — Consolidated ¥ 1,878,342 ¥ 2,238,683 ¥ 2,270,375 ¥ (461,011) ¥ 147,516 ¥ 468,279 +217.4

Geographic Segment: Net Revenues: Japan ¥13,111,457 ¥14,815,282 ¥15,315,812 ¥12,186,737 ¥11,220,303 ¥10,986,246 −2.1 North America 7,687,942 9,029,773 9,423,258 6,222,914 5,670,526 5,429,136 −4.3 Europe 2,727,409 3,542,193 3,993,434 3,013,128 2,147,049 1,981,497 −7.7 Asia 2,042,806 2,225,528 3,120,826 2,719,329 2,655,327 3,374,534 +27.1 Other 1,601,736 1,922,742 2,294,137 1,882,900 1,673,861 1,809,116 +8.1 Intersegment Elimination (6,134,441) (7,587,427) (7,858,227) (5,495,438) (4,416,093) (4,586,841) — Consolidated ¥21,036,909 ¥23,948,091 ¥26,289,240 ¥20,529,570 ¥18,950,973 ¥18,993,688 +0.2

Operating Income (Loss): Japan ¥ 1,075,890 ¥ 1,457,246 ¥ 1,440,286 ¥ (237,531) ¥ (225,242) ¥ (362,396) — North America 495,638 449,633 305,352 (390,192) 85,490 339,503 +297.1 Europe 93,947 137,383 141,571 (143,233) (32,955) 13,148 — Asia 145,546 117,595 256,356 176,060 203,527 312,977 +53.8 Other 67,190 83,497 143,978 87,648 115,574 160,129 +38.6 Intersegment Elimination 131 (6,671) (17,168) 46,237 1,122 4,918 +338.3 Consolidated ¥ 1,878,342 ¥ 2,238,683 ¥ 2,270,375 ¥ (461,011) ¥ 147,516 ¥ 468,279 +217.4

TOYOTA ANNUAL REPORT 2011 43 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Quarterly Financial Summary

Toyota Motor Corporation Fiscal years ended March 31

Yen in billions 2010 2011 First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter Net Revenues ¥3,836.0 ¥4,541.6 ¥5,292.9 ¥5,280.4 ¥4,871.8 ¥4,806.7 ¥4,673.1 ¥4,642.0 % Change −38.3% −24.0% 10.2% 49.3% 27.0% 5.8% −11.7% −12.1% Operating Income (Loss) (194.9) 58.0 189.1 95.3 211.6 111.5 99.0 46.1 % Change —% −65.8% —% —% —% 92.2% −47.6% −51.6% Operating Income Margin −5.1% 1.3% 3.6% 1.8% 4.3% 2.3% 2.1% 1.0% Income (Loss) before Income Taxes and Equity in Earnings of Affiliated Companies (138.5) 75.5 224.9 129.5 263.0 129.1 129.6 41.5 % Change —% −58.8% —% —% —% 70.9% −42.3% −67.9% Net Income (Loss) attributable to Toyota Motor Corporation (77.8) 21.8 153.2 112.2 190.4 98.7 93.6 25.4 % Change —% −84.4% —% —% —% 352.0% −38.9% −77.4% Business Segment: Net Revenues: Automotive ¥3,413.0 ¥4,108.3 ¥4,861.1 ¥4,815.0 ¥4,467.8 ¥4,395.8 ¥4,255.1 ¥4,218.5 Financial Services 320.1 312.0 307.2 306.2 307.6 296.3 297.5 290.8 All Other 204.1 225.1 226.2 292.2 212.9 233.5 238.0 287.8 Intersegment Elimination (101.2) (103.8) (101.6) (133.0) (116.5) (118.9) (117.5) (155.1) Consolidated ¥3,836.0 ¥4,541.6 ¥5,292.9 ¥5,280.4 ¥4,871.8 ¥4,806.7 ¥4,673.1 ¥4,642.0 Operating Income (Loss): Automotive ¥ (239.1) ¥ (21.3) ¥ 124.5 ¥ 49.6 ¥ 96.7 ¥ 33.0 ¥ (27.5) ¥ (16.2) Financial Services 49.6 74.8 80.6 41.9 115.1 68.6 116.4 58.1 All Other (4.6) 5.0 (14.4) 5.1 4.0 10.7 13.4 7.1 Intersegment Elimination (0.8) (0.5) (1.6) (1.3) (4.2) (0.8) (3.3) (2.9) Consolidated ¥ (194.9) ¥ 58.0 ¥ 189.1 ¥ 95.3 ¥ 211.6 ¥ 111.5 ¥ 99.0 ¥ 46.1 Geographic Segment: Net Revenues: Japan ¥2,181.8 ¥2,656.3 ¥3,093.8 ¥3,288.3 ¥2,806.6 ¥2,919.6 ¥2,686.1 ¥2,573.9 North America 1,175.2 1,419.1 1,622.7 1,453.5 1,483.6 1,337.6 1,333.3 1,274.5 Europe 515.1 564.3 561.0 506.7 459.8 465.3 524.2 532.1 Asia 494.1 589.8 762.5 809.0 834.9 794.2 835.1 910.5 Other 343.3 389.7 494.0 446.8 453.7 408.0 489.7 457.7 Intersegment Elimination (873.5) (1,077.6) (1,241.1) (1,223.9) (1,166.8) (1,118.0) (1,195.3) (1,106.7) Consolidated ¥3,836.0 ¥4,541.6 ¥5,292.9 ¥5,280.4 ¥4,871.8 ¥4,806.7 ¥4,673.1 ¥4,642.0 Operating Income (Loss): Japan ¥ (212.0) ¥ (45.6) ¥ 33.9 ¥ (1.5) ¥ (27.5) ¥ (24.5) ¥ (122.4) ¥ (188.0) North America (3.7) 30.5 79.7 (21.2) 109.7 36.1 105.2 88.4 Europe (20.4) 1.7 (21.3) 7.0 (6.8) (2.1) 2.2 19.8 Asia 26.9 38.5 67.1 71.0 90.2 74.0 68.6 80.2 Other 17.4 23.3 39.4 35.5 41.0 31.9 44.3 42.9 Intersegment Elimination (3.1) 9.6 (9.7) 4.5 5.0 (3.9) 1.1 2.8 Consolidated ¥ (194.9) ¥ 58.0 ¥ 189.1 ¥ 95.3 ¥ 211.6 ¥ 111.5 ¥ 99.0 ¥ 46.1

TOYOTA ANNUAL REPORT 2011 44 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

All financial information discussed in this section is derived from Toyota’s consolidated financial Consolidated Vehicle Sales Toyota’s ability to satisfy changing customer statements that appear elsewhere in this annual report. The financial statements have been prepared (Thousands of units) preferences can affect its revenues and earnings 10,000 in conformity with accounting principles generally accepted in the United States of America. significantly.

8,000 The profitability of Toyota’s automotive operations is affected by many factors. These Overview 6,000 factors include:

4,000 • vehicle unit sales volumes, The business segments of Toyota include automo- Great East Japan Earthquake. • the mix of vehicle models and options sold, tive operations, financial services operations and 2,000 • the level of parts and service sales,

all other operations. Automotive operations are Automotive Market Environment 0 • the levels of price discounts and other sales Toyota’s most significant business segment, The worldwide automotive market is highly FY ‘07 ‘08 ‘09 ‘10 ‘11 incentives and marketing costs, accounting for 89% of Toyota’s total revenues competitive and volatile. The demand for automo- • the cost of customer warranty claims and before the elimination of intersegment revenues biles is affected by a number of factors including based on location of customers for the past three other customer satisfaction actions, for fiscal 2011. Toyota’s primary markets based social, political and general economic conditions; fiscal years. • the cost of research and development and on vehicle unit sales for fiscal 2011 were: Japan introduction of new vehicles and technologies; During fiscal 2010, Toyota’s consolidated other fixed costs, (26%), North America (28%), Europe (11%) and and costs incurred by customers to purchase or vehicle unit sales in Japan increased as compared • the prices of raw materials, Asia (17%). Japan’s economy suffered greatly operate vehicles. These factors can cause with the prior fiscal year reflecting frequent • the ability to control costs, from the effects of the Great East Japan consumer demand to vary substantially in different introduction of new products and sales efforts of • the efficient use of production capacity, Earthquake that occurred on March 11, 2011, and geographic markets and for different types of domestic dealers. During fiscal 2011, market • the adverse effect on production due to the its aftermath (collectively, the “Great East Japan automobiles. conditions in Japan deteriorated as compared reliance on various suppliers for the Earthquake”). Toyota experienced impacts on its During fiscal 2011, the automotive market with the prior fiscal year. Despite this, Toyota and provision of supplies, production in the latter half of March 2011. This expanded especially in emerging countries such Lexus brands’ market share in Japan excluding • the adverse effect on market, sales and also had an effect on Toyota’s results of operations as China, and technological development and mini-vehicles was 47.3%, and Toyota’s market productions of natural calamities and in fiscal 2011, particularly in terms of damages on new product launches have accelerated, primarily share (including Daihatsu and Hino brands) in interruptions of social infrastructure, and several types of assets such as inventories and due to increased consumer demand for the Japan including mini-vehicles was 43.7%, both • changes in the value of the Japanese yen an increase in provision for credit losses. The compact and low-price vehicles and heightened maintaining the high level of market share in and other currencies in which Toyota following analysis describes these impacts. See worldwide environmental awareness. Japan from the prior fiscal year. Overseas consoli- conducts business. “Information on the Company — Business The following table sets forth Toyota’s consoli- dated vehicle unit sales decreased during fiscal Overview —” for more detailed information of the dated vehicle unit sales by geographic market 2010, whereas they increased during fiscal 2011. Changes in laws, regulations, policies and During fiscal 2010, total overseas vehicle unit other governmental actions can also materially Thousands of units sales decreased, particularly in Europe, despite impact the profitability of Toyota’s automotive Year Ended March 31, an increase in Asia. During fiscal 2011, vehicle operations. These laws, regulations and policies 2009 2010 2011 unit sales increased in Asia and Other. include those attributed to environmental matters, Japan 1,945 2,163 1,913 Toyota’s share of total vehicle unit sales in vehicle safety, fuel economy and emissions that North America 2,212 2,098 2,031 each market is influenced by the quality, safety, can add significantly to the cost of vehicles. The Europe 1,062 858 796 reliability, price, design, performance, economy European Union has enforced a directive that Asia 905 979 1,255 and utility of Toyota’s vehicles compared with requires manufacturers to be financially respon- Other* 1,443 1,139 1,313 those offered by other manufacturers. The timely sible for taking back end-of-life vehicles and to Overseas total 5,622 5,074 5,395 introduction of new or redesigned vehicles is also take measures to ensure that adequate used Total 7,567 7,237 7,308 an important factor in satisfying customer needs. vehicle disposal facilities are established and * “Other” consists of Central and South America, Oceania, Africa and the Middle East, etc.

TOYOTA ANNUAL REPORT 2011 45 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

those hazardous materials and recyclable parts January 2010, Toyota announced a recall in North order to offer financial services in many countries. Total Assets by Financial Services Operations are removed from vehicles prior to scrapping. America for certain models of Toyota vehicles Toyota’s competitors for retail financing and (¥ Billion) 16,000 See “Legislation Regarding End-of-Life Vehicles”, related to sticking and slow-to-return accelerator retail leasing include commercial banks, credit “Information on the Company — Business pedals. Also in January 2010, Toyota recalled in unions and other finance companies. Meanwhile, 12,000 Overview — Governmental Regulation, Environ- Europe and China certain models of Toyota commercial banks and other captive automobile mental and Safety Standards” and note 23 to the vehicles related to sticking accelerator pedals. In finance companies also compete against Toyota’s 8,000 consolidated financial statements for a more February 2010, Toyota announced a recall in wholesale financing activities. detailed discussion of these laws, regulations and markets including Japan, North America and Toyota’s financial assets decreased during 4,000 policies. Europe related to the braking control system in fiscal 2011 due to the unfavorable impact of

Many governments also regulate local certain vehicle models including the Prius. The fluctuations in foreign currency translation rates. 0 content, impose tariffs and other trade barriers, recalls and other safety measures described FY ‘07 ‘08 ‘09 ‘10 ‘11 and enact price or exchange controls that can above have led to a number of claims, lawsuits limit an automaker’s operations and can make the and government investigations against Toyota in repatriation of profits unpredictable. Changes in the United States. For a more detailed description The following table provides information regarding Toyota’s finance receivables and operating leases in these laws, regulations, policies and other of these claims, lawsuits and government investi- the past two fiscal years. governmental actions may affect the production, gations, see note 23 to the consolidated financial Yen in millions licensing, distribution or sale of Toyota’s products, statements. March 31, cost of products or applicable tax rates. Toyota is The worldwide automotive industry is in a 2010 2011 currently one of the defendants in purported period of global competition which may continue Finance Receivables national class actions alleging violations of the for the foreseeable future, and in general the Retail ¥ 7,162,082 ¥ 7,128,453 U.S. Sherman Antitrust Act. Toyota believes that competitive environment in which Toyota operates Finance leases 1,232,508 1,123,188 its actions have been lawful. In order to avoid a is likely to intensify. Toyota believes it has the Wholesale and other dealer loans 2,051,301 1,990,557 protracted dispute, however, Toyota entered into resources, strategies and technologies in place 10,445,891 10,242,198 a settlement agreement with the plaintiffs at the to compete effectively in the industry as an Deferred origination costs 109,747 104,391 end of February 2006. The settlement agreement independent company for the foreseeable future. Unearned income (482,983) (496,235) is pending the approval of the federal district Allowance for credit losses court, and immediately upon approval the Financial Services Operations Retail (160,351) (92,199) plaintiffs will be required under the terms of the The competition of worldwide automobile financial Finance leases (36,917) (36,024) settlement agreement to withdraw all pending services industry is intensifying despite the Wholesale and other dealer loans (35,211) (28,580) actions against Toyota in the federal district court recovery trend in the automotive markets. As (232,479) (156,803) as well as all state courts and all related actions competition increases, margins on financing Total finance receivables, net 9,840,176 9,693,551 will be closed. From time-to-time when potential transactions may decrease and market share Less – Current portion (4,209,496) (4,136,805) safety problems arise, Toyota issues vehicle may also decline as customers obtain financing Noncurrent finance receivables, net ¥ 5,630,680 ¥ 5,556,746 recalls and takes other safety measures including for Toyota vehicles from alternative sources. Operating Leases safety campaigns with respect to its vehicles. In Toyota’s financial services operations mainly Vehicles ¥ 2,516,948 ¥ 2,404,032 November 2009, Toyota announced a safety include loans and leasing programs for customers Equipment 96,300 87,914 campaign in North America for certain models of and dealers. Toyota believes that its ability to 2,613,248 2,491,946 Toyota and Lexus brands’ vehicles related to floor provide financing to its customers is an important Less – Accumulated depreciation (791,169) (662,255) mat entrapment of accelerator pedals, and later value added service. Therefore, Toyota has Vehicles and equipment on operating leases, net ¥ 1,822,079 ¥ 1,829,691 expanded it to include additional models. In expanded its network of finance subsidiaries in

TOYOTA ANNUAL REPORT 2011 46 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

Toyota’s finance receivables are subject to decreased during fiscal 2010 and 2011, mainly as changes in the prevailing exchange rates of the reduced, but not eliminated, the effects of foreign collectability risks. These risks include consumer a result of lower interest rates. currencies in those countries in which Toyota currency exchange rate fluctuations, which in and dealer insolvencies and insufficient collateral Toyota launched its credit card business in does business compared with the Japanese yen. some years can be significant. See notes 20 and values (less costs to sell) to realize the full carrying Japan in April 2001. As of March 31, 2010, Toyota Even though the fluctuations of currency exchange 21 to the consolidated financial statements for values of these receivables. See discussion in had 7.7 million cardholders, an increase of 0.6 rates to the Japanese yen can be substantial, additional information. “Critical Accounting Estimates — Allowance for million cardholders compared with March 31, and, therefore, significantly impact comparisons Generally, a weakening of the Japanese yen Doubtful Accounts and Credit Losses” and note 2009. As of March 31, 2011, Toyota had 8.9 million with prior periods and among the various against other currencies has a positive effect on 11 to the consolidated financial statements. cardholders, an increase of 1.2 million cardholders geographic markets, the translation risk is a Toyota’s revenues, operating income and net Toyota continues to originate leases to finance compared with March 31, 2010. The credit card reporting consideration and does not reflect income attributable to Toyota Motor Corporation. new Toyota vehicles. These leasing activities are receivables at March 31, 2010 increased by ¥30.8 Toyota’s underlying results of operations. Toyota A strengthening of the Japanese yen against subject to residual value risk. Residual value billion from March 31, 2009 to ¥255.4 billion. The does not hedge against translation risk. other currencies has the opposite effect. In fiscal losses could be incurred when the lessee of a credit card receivables at March 31, 2011 Transaction risk is the risk that the currency 2010 and 2011, the Japanese yen was on average vehicle does not exercise the option to purchase increased by ¥8.1 billion from March 31, 2010 to structure of Toyota’s costs and liabilities will and at the end of the fiscal year stronger against the vehicle at the end of the lease term. See ¥263.5 billion. deviate from the currency structure of sales the U.S. dollar and the euro in comparison to the discussion in “Critical Accounting Estimates — proceeds and assets. Transaction risk relates prior fiscal year. See further discussion in Investment in Operating Leases” and note 2 to Other Business Operations primarily to sales proceeds from Toyota’s “Quantitative and Qualitative Disclosures about the consolidated financial statements. Toyota’s other business operations consist of non-domestic operations from vehicles produced Market Risk — Market Risk Disclosures — Foreign Toyota enters into interest rate swap housing, including the manufacture and sale of in Japan. Currency Exchange Rate Risk”. agreements and cross currency interest rate swap prefabricated homes; information technology Toyota believes that the location of its During fiscal 2010 and 2011, the average agreements to convert its fixed-rate debt to related businesses, including information production facilities in different parts of the world exchange rate of the Japanese yen strengthened variable-rate functional currency debt. A portion technology and telecommunications, intelligent has significantly reduced the level of transaction against the major currencies including the U.S. of the derivative instruments are entered into to transport systems, GAZOO and other. risk. As part of its globalization strategy, Toyota dollar and the euro compared with the average hedge interest rate risk from an economic Toyota does not expect its other business has continued to localize production by exchange rate of the prior fiscal year. The perspective and are not designated as a hedge operations to materially contribute to Toyota’s constructing production facilities in the major operating results excluding the impact of currency of specific assets or liabilities on Toyota’s consolidated results of operations. markets in which it sells its vehicles. In calendar fluctuations described in “Results of Operations consolidated balance sheet and accordingly, 2009 and 2010, Toyota produced 64.5% and — Fiscal 2011 Compared with Fiscal 2010” and unrealized gains or losses related to derivatives Currency Fluctuations 73.4% of Toyota’s non-domestic sales outside “Results of Operations — Fiscal 2010 Compared that are not designated as a hedge are recognized Toyota is affected by fluctuations in foreign Japan, respectively. In North America, 60.0% and with Fiscal 2009” show results of net revenues currently in operations. See discussion in “Critical currency exchange rates. In addition to the 72.6% of vehicles sold in calendar 2009 and 2010 obtained by applying the Japanese yen’s average Accounting Estimates — Derivatives and Other Japanese yen, Toyota is exposed to fluctuations respectively were produced locally. In Europe, exchange rate in the previous fiscal year to the Contracts at Fair Value” and “Quantitative and in the value of the U.S. dollar and the euro and, to 57.0% and 59.0% of vehicles sold in calendar local currency-denominated net revenues for Qualitative Disclosures about Market Risk” and a lesser extent, the Australian dollar, the Canadian 2009 and 2010 respectively were produced fiscal 2010 and 2011, respectively, as if the value note 20 to the consolidated financial statements. dollar, the British pound, and others. Toyota’s locally. Localizing production enables Toyota to of the Japanese yen had remained constant for The fluctuations in funding costs can affect consolidated financial statements, which are locally purchase many of the supplies and the comparable periods. Results excluding the the profitability of Toyota’s financial services presented in Japanese yen, are affected by resources used in the production process, which impact of currency fluctuations year-on-year are operations. Funding costs are affected by a foreign currency exchange fluctuations through allows for a better match of local currency not on the same basis as Toyota’s consolidated number of factors, some of which are not in both translation risk and transaction risk. revenues with local currency expenses. financial statements and do not conform with U.S. Toyota’s control. These factors include general Translation risk is the risk that Toyota’s Toyota also enters into foreign currency GAAP. Furthermore, Toyota does not believe that economic conditions, prevailing interest rates and consolidated financial statements for a particular transactions and other hedging instruments to these measures are a substitute for U.S. GAAP Toyota’s financial strength. Funding costs period or for a particular date will be affected by address a portion of its transaction risk. This has measures. However, Toyota believes that such

TOYOTA ANNUAL REPORT 2011 47 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

results excluding the impact of currency Toyota does not manage any subset of its Results of Operations — Fiscal 2011 Compared with Fiscal 2010 fluctuations year-on-year provide additional useful automotive operations, such as domestic or information to investors regarding the operating overseas operations or parts, as separate Yen in millions performance on a local currency basis. management units. Year ended March 31, 2011 vs. 2010 Change The management of the automotive operations 2010 2011 Amount Percentage Segmentation is aligned on a functional basis with managers Net revenues: Toyota’s most significant business segment is its having oversight responsibility for the major Japan ¥11,220,303 ¥10,986,246 ¥ (234,057) −2.1% automotive operations. Toyota carries out its operating functions within the segment. North America 5,670,526 5,429,136 (241,390) −4.3% automotive operations as a global competitor in Management assesses financial and non-financial Europe 2,147,049 1,981,497 (165,552) −7.7% the worldwide automotive market. Management data such as vehicle unit sales, production Asia 2,655,327 3,374,534 719,207 +27.1% allocates resources to, and assesses the volume, market share information, vehicle model Other* 1,673,861 1,809,116 135,255 +8.1% performance of, its automotive operations as a plans and plant location costs to allocate Intersegment elimination/ unallocated amount (4,416,093) (4,586,841) (170,748) — single business segment on a worldwide basis. resources within the automotive operations. Total ¥18,950,973 ¥18,993,688 ¥ 42,715 +0.2% Operating income (loss): Japan ¥ (225,242) ¥ (362,396) ¥ (137,154) — Geographic Breakdown North America 85,490 339,503 254,013 +297.1% Europe (32,955) 13,148 46,103 — Asia 203,527 312,977 109,450 +53.8% Revenues by Market The following table sets forth Toyota’s net revenues in each geographic Other* 115,574 44,555 +38.6% FY2011 160,129 market based on the country location of the parent company or the Intersegment elimination/ subsidiaries that transacted the sale with the external customer for the unallocated amount 1,122 4,918 3,796 +338.3% past three fiscal years. Total ¥ 147,516 ¥ 468,279 ¥ 320,763 +217.4% Operating margin 0.8% 2.5% 1.7% Yen in millions Income before income taxes and equity Year ended March 31, in earnings of affiliated companies 291,468 563,290 271,822 +93.3% 2009 2010 2011 Net margin from income before income taxes Japan ¥7,471,916 ¥7,314,813 ¥6,966,929 and equity in earnings of affiliated companies 1.5% 3.0% 1.5% Equity in earnings of affiliated North America 6,097,676 5,583,228 5,327,809 Japan 36.7 % companies 45,408 215,016 169,608 +373.5% Europe 2,889,753 2,082,671 1,920,416 North America 28.1 % Europe 10.1 % Net income attributable to Toyota Asia 2,450,412 2,431,648 3,138,112 209,456 408,183 198,727 +94.9% Asia 16.5 % Motor Corporation Other* 1,619,813 1,538,613 1,640,422 All Other Markets 8.6 % Net margin attributable to Toyota Motor Corporation 1.1% 2.1% 1.0% * “Other” consists of Central and South America, Oceania and Africa. * “Other” consists of Central and South America, Oceania and Africa.

TOYOTA ANNUAL REPORT 2011 48 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

Net Revenues Net Revenues Toyota’s net revenues include net revenues compared with the prior fiscal year. The increase Toyota had net revenues for fiscal 2011 of ¥18,993.6 (¥ Billion) from sales of products, consisting of net revenues in net revenues from sales of products is due to 25,000 billion, an increase of ¥42.7 billion, or 0.2%, from automotive operations and all other an increase in Toyota vehicle unit sales by 71 compared with the prior fiscal year. This increase 20,000 operations, that increased by 0.5% during fiscal thousand vehicles. Excluding the difference in reflects the impact of increased vehicle unit sales 2011 compared with the prior fiscal year to the Japanese yen value used for translation 15,000 and changes in sales mix of approximately ¥17,820.5 billion, and net revenues from financial purposes of ¥77.2 billion, net revenues from

¥740.0 billion, as well as increased parts sales of 10,000 services operations that decreased by 4.3% financial services operations would have been ¥69.8 billion, partially offset by unfavorable impact during fiscal 2011 compared with the prior fiscal approximately ¥1,250.3 billion, a 2.0% increase of fluctuations in foreign currency translation rates 5,000 year to ¥1,173.1 billion. Excluding the difference in during fiscal 2011 compared with the prior fiscal of ¥801.3 billion. Excluding the difference in the 0 the Japanese yen value used for translation year. This increase was mainly due to the increase Japanese yen value used for translation purposes FY ‘07 ‘08 ‘09 ‘10 ‘11 purposes of ¥724.1 billion, net revenues from of ¥13.1 billion rental revenue generated by of ¥801.3 billion, net revenues would have been sales of products would have been ¥18,544.6 vehicles and equipment on operating lease. approximately ¥19,794.9 billion during fiscal 2011, billion, a 4.6% increase during fiscal 2011 a 4.5% increase compared with the prior fiscal Japan Earthquake. However, the Asian automotive year. The automotive market in fiscal 2011 market marked a significant increase of 27.6% contracted by 6.6% in Japan compared with the compared with the prior calendar year, reflecting The following table shows the number of financing contracts by geographic region at the end of the prior fiscal year due to the decline in demand the recovery trend of the Asian economy. Under fiscal 2011 and 2010, respectively. following the conclusion of subsidies for these automotive market conditions, Toyota’s Numbers of financing contracts in thousands environmentally-friendly vehicles (“eco-car”) consolidated vehicle unit sales increased to 7,308 Year ended March 31, 2011 vs. 2010 Change offered by the government as a part of its stimulus thousand vehicles by 1.0% compared with the 2010 2011 Amount Percentage packages, as well as the impact of the Great East prior fiscal year. Japan 1,684 1,709 25 +1.5% North America 4,488 4,654 166 +3.7% Europe 774 790 16 +2.0% The table below shows Toyota’s net revenues from external customers by product category and by Asia 428 522 94 +22.1% business. Other* 476 527 51 +10.7% Total 7,850 8,202 352 +4.5% Yen in millions Year ended March 31, 2011 vs. 2010 Change * “Other” consists of Central and South America, Oceania and Africa. 2010 2011 Amount Percentage Geographically, net revenues (before the billion, net revenues in fiscal 2011 would have Vehicles ¥14,309,595 ¥14,507,479 ¥ 197,884 +1.4% Parts and components for overseas production 355,273 335,366 (19,907) −5.6% elimination of intersegment revenues) for fiscal decreased by 2.1% in Japan, and would have Parts and components for after service 1,543,941 1,553,497 9,556 +0.6% 2011 decreased by 2.1% in Japan, 4.3% in North increased by 3.6% in North America, 4.1% in Other 978,499 926,411 (52,088) −5.3% America, and 7.7% in Europe, whereas net Europe, 29.7% in Asia and 11.0% in Other Total Automotive 17,187,308 17,322,753 135,445 +0.8% revenues increased by 27.1% in Asia and 8.1% in compared with the prior fiscal year. All Other 537,421 497,767 (39,654) −7.4% Other compared with the prior fiscal year. The following is a discussion of net revenues Total sales of products 17,724,729 17,820,520 95,791 +0.5% Excluding the difference in the Japanese yen in each geographic market (before the elimination Financial services 1,226,244 1,173,168 (53,076) −4.3% value used for translation purposes of ¥801.3 of intersegment revenues). Total ¥18,950,973 ¥18,993,688 ¥ 42,715 +0.2%

TOYOTA ANNUAL REPORT 2011 49 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

Japan thousand vehicles, or 14.1%, increase in RAV4 currency translation rates of ¥448.0 billion. The sales. Despite the improvements including a decrease in vehicle unit sales resulted primarily Thousands of units favorable effect of changes in sales mix, net from an 84 thousand vehicles, or 23.0%, decrease Year ended March 31, 2011 vs. 2010 Change 2010 2011 Amount Percentage revenues decreased compared with the prior in Corolla sales and a 28 thousand vehicles, or Toyota’s consolidated vehicle unit sales 2,163 1,913 (250) −11.5% fiscal year due to the decrease in vehicle unit 7.9%, decrease in Camry sales, partially offset by sales by an intense competitive environment that the increase in vehicle unit sales of the Yen in millions introduced new vehicle models to the market and aforementioned specified vehicle models. Year ended March 31, 2011 vs. 2010 Change the unfavorable impact of fluctuations in foreign 2010 2011 Amount Percentage Net revenues: Europe Sales of products ¥11,095,044 ¥10,864,329 ¥(230,715) −2.1% Financial services 125,259 121,917 (3,342) −2.7% Thousands of units Total ¥11,220,303 ¥10,986,246 ¥(234,057) −2.1% Year ended March 31, 2011 vs. 2010 Change 2010 2011 Amount Percentage Due to the decline in demand following the vehicles, or 31.1%, decrease in Passo sales and a Toyota’s consolidated vehicle unit sales 858 796 (62) −7.3% conclusion of subsidies for eco-car offered by the 29 thousand vehicles, or 38.4%, decrease in government as a part of its stimulus packages, as WISH sales. On the other hand, the decrease in Yen in millions well as the impact of the Great East Japan net revenues from domestic vehicle unit sales Year ended March 31, 2011 vs. 2010 Change 2010 2011 Amount Percentage Earthquake, Toyota’s domestic vehicle unit sales was partially offset by the increase in the number Net revenues: decreased by 250 thousand vehicles compared of exported vehicles for the overseas markets of Sales of products ¥2,065,768 ¥1,910,336 ¥(155,432) −7.5% with the prior fiscal year. The decrease in vehicle 190 thousand vehicles, or 8.6%. Financial services 81,281 71,161 (10,120) −12.5% unit sales resulted primarily from a 30 thousand Total ¥2,147,049 ¥1,981,497 ¥(165,552) −7.7%

North America Although retail sales of Toyota and Lexus brands’ vehicles decrease in Toyota’s vehicle unit sales vehicles increased in some European countries compared with the prior fiscal year resulting from Thousands of units compared with the prior fiscal year, such as 36 a decrease in demand following the conclusion of Year ended March 31, 2011 vs. 2010 Change 2010 2011 Amount Percentage thousand vehicles, or 52.5%, increase in Russia government stimulus packages in Western Toyota’s consolidated vehicle unit sales 2,098 2,031 (67) −3.2% and 20 thousand vehicles, or 82.6%, increase in Europe, and the unfavorable impact of fluctuations Turkey, net revenues in Europe generally in foreign currency translation rates of ¥253.2 Yen in millions decreased due primarily to the 62 thousand billion. Year ended March 31, 2011 vs. 2010 Change 2010 2011 Amount Percentage Net revenues: Sales of products ¥4,782,379 ¥4,603,192 ¥(179,187) −3.7% Financial services 888,147 825,944 (62,203) −7.0% Total ¥5,670,526 ¥5,429,136 ¥(241,390) −4.3%

In North America, the vehicle unit sales of sales trends were mainly represented by a 48 specified vehicle models increased due to the thousand vehicles, or 54.5%, increase in Sienna recovering trends of the automobile market and sales, a 30 thousand vehicles, or 39.2%, increase improvements to the overall economy. The in Highlander sales, a 29 thousand vehicles, or increase in vehicle unit sales and this impact on 123.7%, increase in 4Runner sales, and a 27

TOYOTA ANNUAL REPORT 2011 50 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

Asia Operating Costs and Expenses

Thousands of units Yen in millions Year ended March 31, 2011 vs. 2010 Change Year ended March 31, 2011 vs. 2010 Change 2010 2011 Amount Percentage 2010 2011 Amount Percentage Toyota’s consolidated vehicle unit sales 979 1,255 276 +28.1% Operating costs and expenses Cost of products sold ¥15,971,496 ¥15,985,783 ¥ 14,287 +0.1% Yen in millions Cost of financing operations 712,301 629,543 (82,758) −11.6% Year ended March 31, 2011 vs. 2010 Change Selling, general and administrative 2,119,660 1,910,083 (209,577) −9.9% 2010 2011 Amount Percentage Total ¥18,803,457 ¥18,525,409 ¥(278,048) −1.5% Net revenues: Sales of products ¥2,612,595 ¥3,325,466 ¥712,871 +27.3% Yen in millions Financial services 42,732 49,068 6,336 +14.8% Changes in operating costs and expenses: 2011 vs. 2010 Change Total ¥2,655,327 ¥3,374,534 ¥719,207 +27.1% Effect of increase in vehicle unit sales and changes in sales mix ¥ 580,000 Toyota’s vehicle unit sales in Asia increased by Asian economy, particularly in Thailand and Effect of fluctuation in foreign currency translation rates (765,100) 276 thousand vehicles compared with the prior Indonesia. Excluding the difference of ¥70.7 Effect of increase in parts sales 15,400 fiscal year and represented a record high unit billion in the Japanese yen value used for Effect of cost reduction efforts (180,000) sales. This increase in net revenues was due to translation purposes, net revenues would have Effect of increase in miscellaneous costs and others 71,652 the overall recovery of Asian automotive markets increased by ¥789.9 billion. Total ¥(278,048) which was supported by the recovery trend of the Operating costs and expenses decreased by ¥70.0 billion decrease in product warranty costs Other ¥278.0 billion, or 1.5%, to ¥18,525.4 billion during due to decrease in payments to repair or replace fiscal 2011 compared with the prior fiscal year. defects of vehicles based on warranty contracts. Thousands of units This decrease resulted from the ¥765.1 billion See note 14 to the consolidated financial Year ended March 31, 2011 vs. 2010 Change 2010 2011 Amount Percentage favorable impact of fluctuations in foreign currency statements for further information. Toyota’s consolidated vehicle unit sales 1,139 1,313 174 +15.3% translation rates, and the ¥180.0 billion impact of In fiscal 2011, Toyota announced recalls and cost reduction efforts, partially offset by the other safety measures including the following: Yen in millions ¥580.0 billion impact of increase in vehicle unit In July 2010, Toyota announced in Japan and Year ended March 31, 2011 vs. 2010 Change sales and change in sales mix and the ¥71.7 other regions the voluntary safety recall of certain 2010 2011 Amount Percentage billion increase in the miscellaneous costs and models of Toyota and Lexus brands’ vehicles Net revenues: others including ¥20.0 billion increase in costs related to abnormal engine noise or idling due to Sales of products ¥1,571,846 ¥1,694,680 ¥122,834 +7.8% related to the Great East Japan Earthquake, and engine valve springs that contained some foreign Financial services 102,015 114,436 12,421 +12.2% the ¥15.4 billion impact of increase in parts sales. materials. The affected vehicle models included Total ¥1,673,861 ¥1,809,116 ¥135,255 +8.1% The ¥71.7 billion increase in miscellaneous Crown, GS350/450h/460, IS350, and LS460/600h/ Net revenues in Other increased due to increases thousand vehicles in the Middle East, by 50 costs and others includes ¥30.0 billion increase 600hL, and 275 thousand vehicles were included in Toyota’s vehicle unit sales as a result of thousand vehicles in Central and South America, in product quality related expenses. This cost in this recall. economic recovery in certain of these markets. and by 25 thousand vehicles in Africa, respectively, increased compared with the prior fiscal year due In August 2010, Toyota announced in North Toyota’s vehicle unit sales increased by 103 compared with the prior fiscal year. to the approximately ¥100.0 billion increase in America the voluntary safety recall of certain costs related to recalls and other safety measures models of Toyota vehicles to address the check conducted to heighten the level of reassurance engine illuminations and harsh shifting that may for customers, partially offset by the approximately result from improper manufacturing of some

TOYOTA ANNUAL REPORT 2011 51 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

Electronic Control Modules (ECMs). The affected Toyota expanded the coverage of a safety efforts. The increase in miscellaneous costs was the ¥30.0 billion decrease in provision for residual vehicle models included Corolla and Matrix, and campaign in North America for certain models of due mainly to the ¥30.0 billion increase in costs value losses and the ¥6.4 billion recognition of 1,360 thousand vehicles were included in this Toyota and Lexus brands’ vehicles related to floor related to quality initiatives, the ¥25.0 billion increase valuation gains on interest rate swaps stated at fair recall. mat entrapment of accelerator pedals to include in research and development expenses and the value. The decrease in provision for residual value In October 2010, Toyota announced in Japan additional models, which was initially announced ¥5.2 billion increase in labor costs. The increase in losses is attributable to prices in the used vehicles and other regions the voluntary safety recall of in November 2009. In March 2011, Toyota also vehicle unit sales and the changes in sales mix was markets remaining at an unprecedented high level certain models of Toyota and Lexus brands’ expanded the safety campaign coverage to due to the automotive market recovery associated particularly in the United States. vehicles related to the connector terminal that may include more models to heighten the level of with global economic turnaround. fail due to the inflexibility of the material of the fuel reassurance for customers. The vehicle models Selling, General and Administrative Expenses pump wiring harness and braking performance involved were LX570, RAV4, and 4Runner. Cost of Products Sold Selling, general and administrative expenses (¥ Billion) (%) that may gradually decline by brake fluid leakage % of net revenues decreased by ¥209.5 billion, or 9.9%, to ¥1,910.1 20,000 100 from the brake master cylinder. The affected Cost Reduction Efforts (Right scale) billion during fiscal 2011 compared with the prior

vehicle models included Crown, Crown Majesta, During fiscal 2011, continued cost reduction efforts 16,000 80 fiscal year. This decrease reflects the ¥115.5 Mark X, KlugerL, KlugerV, Harrier, AlphardG, reduced operating costs and expenses by ¥180.0 billion favorable impact of fluctuations in foreign AlphardV, Avalon, Highlander, RX330, GS300, billion. The effect of cost reduction efforts include 12,000 60 currency translation rates and the ¥83.9 billion

GS350, IS250, IS350, and IS220D, and 1,470 the impact of fluctuation in the price of steel, precious 8,000 40 decrease for the financial services operations. thousand vehicles were included in this recall. metals, non-ferrous alloys including aluminum, This decrease for the financial services operations In January 2011, Toyota announced in Japan plastic parts and other production materials and 4,000 20 includes the ¥100.0 billion decrease in provision

and other regions the voluntary safety recall of parts. In fiscal 2011, raw materials prices were on an 0 0 for credit losses and net charge-offs, which is certain models of Toyota and Lexus brands’ increasing trend; however, continued cost reduction FY ‘07 ‘08 ‘09 ‘10 ‘11 attributable to the prices of used vehicles vehicles to address fuel leakage that may result efforts, by working closely with suppliers, contributed remaining at an unprecedented high level mainly from improper manufacturing of engine fuel pipe to the improvement in earnings by offsetting the Cost of Financing Operations in the United States and the prices of used Toyota and fuel pump. The affected vehicle models effects from price increase. These cost reduction and Lexus brands’ vehicles also remaining at a Yen in millions included Noah, Voxy, RAV4L, RAV4J, Caldina, efforts related to ongoing value engineering and high level, partially offset by the ¥15.0 billion 2011 vs. 2010 Isis, Vista, Vista Ardeo, Opa, Premio, Allion, Gaia, value analysis activities, the use of common parts Change increase in provision for credit losses and Nadia, WISH, Avensis, and Avensis Wagon and resulting in a reduction of part types and other Changes in cost of financing operations: charge-offs in relation to the Great East Japan 1,343 thousand vehicles were included in this manufacturing initiatives designed to reduce the Effect of fluctuation in foreign Earthquake. currency translation rates ¥(64,700) recall. costs of vehicle production. Effect of increase in valuation gains The net changes in fiscal 2010 and 2011 in on interest rate swaps stated at R&D Expenses fair value (6,400) (¥ Billion) (%) the accrual for the four recalls and other safety Cost of Products Sold % of net revenues 1,000 12 measures that occurred in fiscal 2010 are shown Cost of products sold increased by ¥14.3 billion, or Effect of decrease in provision for (Right scale) residual value losses (30,000) below. 0.1%, to ¥15,985.8 billion during fiscal 2011 Other 18,342 750 9 compared with the prior fiscal year. The increase Yen in millions Total ¥(82,758) resulted from the ¥520.0 billion impact of increase Year ended March 31, 500 6 in vehicle unit sales and changes in sales mix, 2010 2011 ¥90.0 billion increase in miscellaneous costs, and Cost of financing operations decreased by ¥82.8 Balance at the beginning of year ¥ — ¥ 56,600 250 3 the ¥13.9 billion impact of increases in parts sales, billion, or 11.6%, to ¥629.5 billion during fiscal 2011 Accrual 89,000 13,100 Amounts paid (32,400) (51,700) partially offset by the ¥584.9 billion favorable impact compared with the prior fiscal year. The decrease 0 0 FY ‘07 ‘08 ‘09 ‘10 ‘11 Balance at the end of year ¥ 56,600 ¥ 18,000 of fluctuations in foreign currency translation rates, resulted from the ¥64.7 billion favorable impact of and the ¥180.0 billion impact of cost reduction fluctuations in foreign currency translation rates,

TOYOTA ANNUAL REPORT 2011 52 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

Operating Income increased by ¥46.1 billion in Europe, increased by the ¥330.0 billion unfavorable impact of fluctuations Europe ¥109.4 billion, or 53.8%, in Asia, and increased in foreign currency translation rates and the ¥50.0 Yen in millions Yen in millions by ¥44.6 billion, or 38.6%, in Other compared billion increase in miscellaneous costs and others, 2011 vs. 2010 2011 vs. 2010 Change with the prior fiscal year, whereas it decreased by partially offset by the ¥140.0 billion impact of cost Change Changes in operating income and loss: ¥137.2 billion in Japan. reduction efforts in automotive operations. The Changes in operating income and loss: Effect of increase in vehicle unit sales ¥50.0 billion increase in miscellaneous costs and Effect of fluctuation in foreign and changes in sales mix and other Operating Income (Loss) others includes the ¥20.0 billion increase in costs currency translation rates ¥ 1,400 operational factors ¥300,000 Effect of cost reduction efforts, (¥ Billion) (%) related to the Great East Japan Earthquake. Effect of increase in parts sales 54,400 % of net revenues decrease in miscellaneous costs 2,500 (Right scale) 20 Effect of fluctuation in foreign and others 44,703 2,000 16 currency translation rates (36,200) North America Total ¥46,103 Effect of increase in miscellaneous 1,500 12 costs (30,000) Yen in millions 1,000 8 The increase in operating income in Europe was Effect of cost reduction efforts, 2011 vs. 2010 financial services operations, and 500 4 Change due to the ¥30.0 billion decrease in miscellaneous others 32,563 0 0 Changes in operating income and loss: costs in automotive operations, the ¥5.0 billion Total ¥320,763 -5,000 -4 Effect of increase in production volume effect of cost reduction efforts, the ¥5.0 billion and other operational factors ¥105,000 increase in operating income in the financial Effect of fluctuation in foreign Toyota’s operating income increased by ¥320.7 FY ‘07 ‘08 ‘09 ‘10 ‘11 services operations, and the ¥1.4 billion favorable currency translation rates (23,800) billion, or 217.4%, to ¥468.2 billion during fiscal Effect of financial services operations, impact of fluctuations in foreign currency 2011 compared with the prior fiscal year. This The following is a description of operating cost reduction efforts, decrease in translation rates. 172,813 increase was favorably impacted by the ¥300.0 income and loss in each geographic market. miscellaneous costs and others Total ¥254,013 billion increase in vehicle unit sales and changes Asia in sales mix and other operational factors, the Japan Yen in millions ¥54.4 billion increase in parts sales, the ¥32.6 The increase in operating income in North Yen in millions 2011 vs. 2010 billion impact of cost reduction efforts, financial America was due to the ¥130.0 billion increase in Change 2011 vs. 2010 services operations, and others, partially offset by Change operating income in the financial services Changes in operating income and loss: the ¥36.2 billion unfavorable impact of fluctuations Changes in operating income and loss: operations including impacts of the ¥100.0 billion Effect of increase in production in foreign currency translation rates, and the ¥30.0 Effect of increase in the number of decrease in the provision for credit losses and net volume and vehicle unit sales and other operational factors ¥105,000 billion increase in miscellaneous costs including exported vehicles for the overseas charge-offs and the ¥30.0 billion decrease in the market and other operational factors ¥ 115,000 Effect of fluctuation in foreign ¥20.0 billion impact of increase in expenses provision for residual value losses primarily for (5,900) Effect of cost reduction efforts, currency translation rates related to the Great East Japan Earthquake. The increase in miscellaneous costs sales finance subsidiaries in the United States, Effect of cost reduction efforts, decrease 10,350 ¥32.6 billion increase of cost reduction efforts, and others (252,154) the ¥105.0 billion impact of increase in production in miscellaneous costs and others Total ¥109,450 financial services operations, and others was due Total ¥(137,154) volume, the ¥30.0 billion impact of cost reduction to the ¥180.0 billion impact of cost reduction efforts, and the ¥15.0 billion decrease in efforts and the ¥130.0 billion impact of financial The increase in operating losses in Japan was due miscellaneous costs and others, partially offset The increase in operating income in Asia was due services operations, partially offset by the ¥290.0 to the ¥252.2 billion increase in cost reduction by the ¥23.8 billion unfavorable impact of the to the ¥105.0 billion impact of increases in both billion unfavorable impact of fluctuations in foreign efforts, increase in miscellaneous costs and others, fluctuations in foreign currency translation rates. production volume and vehicle unit sales and currency translation rates. partially offset by the ¥115.0 billion impact of increase The increase in production volume in North other operational factors, partially offset by the During fiscal 2011, operating income (before in the number of exported vehicles for the overseas America is attributable to the increase in local ¥5.9 billion unfavorable impact of fluctuations in elimination of intersegment profits), increased by market. The cost reduction efforts, increase in vehicle production by 296 thousands of RAV4, foreign currency translation rates. The increases ¥254.1 billion, or 297.1%, in North America, miscellaneous costs and others were mainly due to Highlander and other models. in both production volume and vehicle unit sales

TOYOTA ANNUAL REPORT 2011 53 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

in Asia were primarily attributable to the increase Net Income and Loss attributable to the Net Income (Loss), and ROE (¥ Billion) (%) Noncontrolling Interest and Equity in ROE (Right scale) in Toyota’s vehicle unit sales by 276 thousand 2,000 20 vehicles supported by the recovery of Asian Earnings of Affiliated Companies automotive markets, particularly in Thailand and Net income attributable to the noncontrolling 1,500 15 Indonesia, as the Asian economy is generally in interest increased by ¥22.5 billion, or 64.9%, to 1,000 10 the recovery trend. ¥57.3 billion during fiscal 2011 compared with the 500 5 prior fiscal year. This increase was due to an Other Income and Expenses increase during fiscal 2011 in net income 0 0

Interest and dividend income increased by ¥12.6 attributable to the shareholders of consolidated -500 -5 billion, or 16.0%, to ¥90.8 billion during fiscal 2011 subsidiaries. compared with the prior fiscal year due to the Equity in earnings of affiliated companies FY ‘07 ‘08 ‘09 ‘10 ‘11 ¥10.5 billion increase of dividend income. during fiscal 2011 increased by ¥169.6 billion, or Interest expense decreased by ¥4.1 billion, or 373.5%, to ¥215.0 billion compared with the prior Segment Information 12.2%, to ¥29.3 billion during fiscal 2011 fiscal year. This increase was due to an increase The following is a discussion of results of operations for each of Toyota’s operating segments. The compared with the prior fiscal year. during fiscal 2011 in net income attributable to the amounts presented are prior to intersegment elimination. Foreign exchange gain, net decreased by shareholders of affiliated companies accounted Yen in millions ¥53.9 billion, or 79.0%, to ¥14.3 billion during for by the equity method. Year ended March 31, 2011 vs. 2010 Change fiscal 2011 compared with the prior fiscal year. 2010 2011 Amount Percentage Foreign exchange gains and losses include the Net Income attributable to Toyota Motor Net revenues ¥17,197,428 ¥17,337,320 ¥139,892 +0.8% Corporation Automotive differences between the value of foreign currency Operating income (loss) (86,370) 85,973 172,343 — denominated sales translated at prevailing Net income attributable to the shareholders of Net revenues ¥ 1,245,407 ¥ 1,192,205 ¥ (53,202) −4.3% Financial Services exchange rates and the value of the sales amounts Toyota Motor Corporation increased by ¥198.7 Operating income 246,927 358,280 111,353 +45.1% settled during the year, including those settled billion, or 94.9%, to ¥408.1 billion during fiscal Net revenues ¥ 947,615 ¥ 972,252 ¥ 24,637 +2.6% All Other using forward foreign currency exchange 2011 compared with the prior fiscal year. Operating income (loss) (8,860) 35,242 44,102 — contracts. Intersegment elimination/ Net revenues ¥ (439,477) ¥ (508,089) ¥ (68,612) — Other income, net decreased by ¥11.7 billion, Other Comprehensive Income and Loss unallocated amount: Operating income (loss) (4,181) (11,216) (7,035) — or 37.7%, to ¥19.2 billion during fiscal 2011 Other comprehensive income decreased by compared with the prior fiscal year. ¥558.8 billion to loss of ¥297.9 billion for fiscal 2011 compared with the prior fiscal year. This Automotive Operations Segment Operating income from the automotive Income Taxes decrease resulted from unfavorable foreign The automotive operations segment is Toyota’s operations increased by ¥172.3 billion during fiscal The provision for income taxes increased by currency translation adjustments losses of ¥287.6 largest operating segment by net revenues. Net 2011 compared with the prior fiscal year to ¥86.0 ¥220.2 billion, or 237.6%, to ¥312.8 billion during billion in fiscal 2011 compared with gains of ¥9.8 revenues for the automotive segment increased billion. This increase in operating income was due fiscal 2011 compared with the prior fiscal year billion in the prior fiscal year, and from unrealized during fiscal 2011 by ¥139.9 billion, or 0.8%, to the ¥300.0 billion impact of increased vehicle due to the increase in income before income holding losses on securities in fiscal 2011 of ¥26.1 compared with the prior fiscal year to ¥17,337.3 unit sales and the changes in sales mix, the ¥180.0 taxes. The effective tax rate for fiscal 2011 was billion compared with gains of ¥176.4 billion in the billion. The increase was due to the ¥740.0 billion billion effect of cost reduction efforts and the ¥54.4 55.5%, which was higher than the statutory tax prior fiscal year. The decrease in unrealized impact of increased vehicle unit sales and the billion impact of increase in parts sales, partially rate in Japan. This was due to the increase in holding gains on securities was due to changes changes in sales mix and the ¥69.8 billion increase offset by the ¥30.0 billion increase in miscellaneous deferred tax liabilities relating to undistributed in stock prices. in parts sales, partially offset by the ¥722.5 billion costs and the ¥290.0 billion unfavorable impact of earnings in affiliated companies accounted for by unfavorable impact of fluctuations in foreign fluctuations in foreign currency rates. the equity method. currency translation rates.

TOYOTA ANNUAL REPORT 2011 54 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

The increase in vehicle unit sales and changes from vehicles and equipment on operating leases. Results of Operations — Fiscal 2010 Compared with Fiscal 2009 in sales mix was due primarily to an increase in Operating income from financial services Toyota’s vehicle unit sales by 71 thousand vehicles operations increased by ¥111.3 billion, or 45.1%, to Yen in millions compared with the prior fiscal year, favored by the ¥358.2 billion during fiscal 2011 compared with Year ended March 31, 2010 vs. 2009 Change automotive market recovery during fiscal 2011. the prior fiscal year. This increase was due to the 2009 2010 Amount Percentage The increase in miscellaneous costs includes the ¥100.0 billion decrease in provision for credit Net revenues: ¥30.0 billion increase in costs related to quality losses and net charge-offs, and the ¥30.0 billion Japan ¥12,186,737 ¥11,220,303 ¥ (966,434) −7.9% initiatives and the ¥5.0 billion impact of damages in decrease in provision for residual value losses, North America 6,222,914 5,670,526 (552,388) −8.9% inventories and other assets resulting from the while the provision for credit losses and net Europe 3,013,128 2,147,049 (866,079) −28.7% Asia 2,719,329 2,655,327 (64,002) −2.4% Great East Japan Earthquake. charge-offs include the ¥15.0 billion increase in Other* 1,882,900 1,673,861 (209,039) −11.1% provision for credit losses and net charge-offs Intersegment elimination/unallocated amount (5,495,438) (4,416,093) 1,079,345 — Financial Services Operations Segment related to the Great East Japan Earthquake. Total ¥20,529,570 ¥18,950,973 ¥(1,578,597) −7.7% Net revenues for the financial services operations The decrease in provisions for credit losses, Operating income (loss): decreased during fiscal 2011 by ¥53.2 billion, or net of charge-offs and residual value losses are Japan ¥ (237,531) ¥ (225,242) ¥ 12,289 — 4.3%, compared with the prior fiscal year to primarily attributable to used car prices rising to North America (390,192) 85,490 475,682 — ¥1,192.2 billion. This decrease was primarily due to an unprecedented high level in the United States Europe (143,233) (32,955) 110,278 — the unfavorable impact of fluctuations in foreign and the prices of used Toyota and Lexus brands’ Asia 176,060 203,527 27,467 +15.6% currency translation rates of ¥77.5 billion, partially vehicles also remaining at a high level. Other* 87,648 115,574 27,926 +31.9% offset by the ¥13.1 billion increase in rental income Intersegment elimination/unallocated amount 46,237 1,122 (45,115) −97.6% Total ¥ (461,011) ¥ 147,516 ¥ 608,527 — Operating margin −2.2% 0.8% 3.0% Ratio of credit loss experience in the United States is as follows: Income (loss) before income taxes and equity in earnings of affiliated companies (560,381) 291,468 851,849 — Year ended March 31, Net margin from income (loss) before income taxes 2010 2011 and equity in earnings of affiliated companies −2.7% 1.5% 4.2% Net charge-offs as a percentage of average gross earning assets: Equity in earnings of affiliated companies 42,724 45,408 2,684 +6.3% Finance receivables 1.15% 0.61% Net income (loss) attributable to Toyota Motor Corporation (436,937) 209,456 646,393 — Operating lease 0.63 0.22 Net margin attributable to Toyota Motor Total 1.03% 0.52% Corporation −2.1% 1.1% 3.2% * “Other” consists of Central and South America, Oceania and Africa.

All Other Operations Segment Net revenues for Toyota’s other operations Operating income from Toyota’s other segments increased by ¥24.6 billion, or 2.6%, to operations segments increased by ¥44.1 billion Net Revenues sales mix of approximately ¥570.0 billion, partially ¥972.2 billion during fiscal 2011 compared with to ¥35.2 billion during fiscal 2011 compared with Toyota had net revenues for fiscal 2010 of offset by the increased parts sales of ¥34.9 billion the prior fiscal year. the prior fiscal year. ¥18,950.9 billion, a decrease of ¥1,578.6 billion, during fiscal 2010. Excluding the difference in the or 7.7%, compared with the prior fiscal year. This Japanese yen value used for translation purposes decrease principally reflects the unfavorable of ¥986.9 billion, net revenues would have been impact of fluctuations in foreign currency approximately ¥19,937.8 billion during fiscal 2010, translation rates of ¥986.9 billion, the impact of a 2.9% decrease compared with the prior fiscal decreased vehicle unit sales and changes in year. The automotive market expanded by 10.0%

TOYOTA ANNUAL REPORT 2011 55 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

in Japan compared to the prior fiscal year the prior calendar year due to the continuous The following table shows the number of financing contracts by geographic region at the end of the benefiting from the government stimulus market downturn. Affected by this downturn, fiscal year 2009 and 2010. packages. However, other automotive markets Toyota’s vehicle unit sales decreased to 7,237 Number of financing contracts in thousands contracted significantly such as by 22.0% in thousand vehicles, a decrease of 4.4%, compared Year ended March 31, 2010 vs. 2009 Change North America and 13.7% in Europe compared to to the prior fiscal year. 2009 2010 Amount Percentage Japan 1,660 1,684 24 +1.4% The table below shows Toyota’s net revenues from external customers by product category and by North America 4,403 4,488 85 +1.9% business segment. Europe 748 774 26 +3.5% Asia 387 428 41 +10.6% Yen in millions Other* 440 476 36 +8.2% Year ended March 31, 2010 vs. 2009 Change Total 7,638 7,850 212 +2.8% 2009 2010 Amount Percentage * “Other” consists of Central and South America, Oceania and Africa. Vehicles ¥15,635,490 ¥14,309,595 ¥(1,325,895) −8.5% Parts and components for overseas production 298,176 355,273 57,097 +19.1% Geographically, net revenues (before the decreased by 7.9% in Japan, 1.2% in North Parts and components for after service 1,575,316 1,543,941 (31,375) −2.0% elimination of intersegment revenues) for fiscal America, 20.1% in Europe, 7.3% in Other and Other 1,041,519 978,499 (63,020) −6.1% 2010 decreased by 7.9% in Japan, 8.9% in North would have increased by 5.5% in Asia compared Total Automotive 18,550,501 17,187,308 (1,363,193) −7.3% America, 28.7% in Europe, 2.4% in Asia and with the prior fiscal year. All Other 623,219 537,421 (85,798) −13.8% 11.1% in Other compared with the prior fiscal year. The following is a discussion of net revenues Total sales of products 19,173,720 17,724,729 (1,448,991) −7.6% Excluding the difference in the Japanese yen in each geographic market (before the elimination Financial services 1,355,850 1,226,244 (129,606) −9.6% value used for translation purposes of ¥1,020.2 of intersegment revenues). Total ¥20,529,570 ¥18,950,973 ¥(1,578,597) −7.7% billion, net revenues in fiscal 2010 would have

Toyota’s net revenues include net revenues primarily to a decrease in vehicle unit sales which Japan from sales of products, consisting of net revenues resulted from the generally difficult market Thousands of units from automotive operations and all other conditions in the automotive industry as a whole Year ended March 31, 2010 vs. 2009 Change operations, that decreased by 7.6% during fiscal in fiscal 2010. Excluding the difference in the 2009 2010 Amount Percentage 2010 compared with the prior fiscal year to Japanese yen value used for translation purposes Toyota’s consolidated vehicle unit sales 1,945 2,163 218 +11.2% ¥17,724.7 billion, and net revenues from financial of ¥92.9 billion, net revenues from financial services operations that decreased by 9.6% services operations would have been Yen in millions during fiscal 2010 compared with the prior fiscal approximately ¥1,319.1 billion, a 2.7% decrease Year ended March 31, 2010 vs. 2009 Change 2009 2010 Amount Percentage year to ¥1,226.2 billion. Excluding the difference during fiscal 2010 compared with the prior fiscal Net revenues: in the Japanese yen value used for translation year. The decrease in net revenues from financial Sales of products ¥12,067,494 ¥11,095,044 ¥(972,450) −8.1% purposes of ¥894.0 billion, net revenues from services operations resulted primarily from the Financial services 119,243 125,259 6,016 +5.0% sales of products would have been ¥18,618.7 unfavorable impact of fluctuations in foreign Total ¥12,186,737 ¥11,220,303 ¥(966,434) −7.9% billion, a 2.9% decrease during fiscal 2010 currency translation rates of ¥92.9 billion and the compared with the prior fiscal year. The decrease ¥63.5 billion decrease in rental income from Supported by government stimulus packages 210 thousand vehicles, or 297.6%, increase in in net revenues from sales of products is due vehicles and equipment on operating leases. including the eco-car tax reduction and subsidies, Prius sales and a 19 thousand vehicles increase Toyota’s domestic vehicle unit sales increased by in SAI sales. However, net revenues in Japan 218 thousand vehicles compared to the prior decreased reflecting the decrease by 497 fiscal year mainly within the environmentally- thousand vehicles, or 18.4%, in the number of friendly and new vehicle markets, consisting of a exported vehicles for the overseas markets.

TOYOTA ANNUAL REPORT 2011 56 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

North America Although retail sales of Toyota and Lexus in Europe overall decreased primarily due to brands’ vehicle increased in some European the 204 thousand vehicles decrease in Toyota’s Thousands of units countries such as increases of 9 thousand vehicle unit sales which resulted from the Year ended March 31, 2010 vs. 2009 Change 2009 2010 Amount Percentage vehicles, or 8.5%, in Germany and 7 thousand downturn in the market and the impact of Toyota’s consolidated vehicle unit sales 2,212 2,098 (114) −5.2% vehicles, or 14.5%, in Spain compared with the fluctuations in foreign currency translation rates prior fiscal year benefiting from various of ¥260.6 billion. Yen in millions government stimulus packages, net revenues Year ended March 31, 2010 vs. 2009 Change 2009 2010 Amount Percentage Asia Net revenues: Sales of products ¥5,226,426 ¥4,782,379 ¥(444,047) −8.5% Thousands of units Financial services 996,488 888,147 (108,341) −10.9% Year ended March 31, 2010 vs. 2009 Change Total ¥6,222,914 ¥5,670,526 ¥(552,388) −8.9% 2009 2010 Amount Percentage Toyota’s consolidated vehicle unit sales 905 979 74 +8.3% In North America, the market is recovering thousand vehicles, or 15.8%, in January, 2010 gradually from the downturn stemming from the and 9 thousand vehicles, or 8.5%, decrease in Yen in millions financial crisis since the fall of 2008 and Toyota’s February, 2010 in each case compared with the Year ended March 31, 2010 vs. 2009 Change 2009 2010 Amount Percentage vehicle unit sales in the second half of fiscal 2010 same month in the prior year. However, net Net revenues: increased by 339 thousand vehicles, or 39.6%, revenues decreased primarily as a result of a Sales of products ¥2,676,939 ¥2,612,595 ¥(64,344) −2.4% year-on-year primarily consisting of an increase decrease in vehicle unit sales by 114 thousand Financial services 42,390 42,732 342 +0.8% by 57 thousand vehicles, or 35.3%, increase in vehicles during fiscal 2010 compared with the Total ¥2,719,329 ¥2,655,327 ¥(64,002) −2.4% Corolla sales, 50 thousand vehicles, or 33.9%, in prior fiscal year due to a significant decrease in Camry sales, 48 thousand vehicles, or 86.1%, in vehicle unit sales by 453 thousand vehicles, or Although Toyota’s vehicle unit sales increased by in foreign currency translation rates of ¥212.9 RAV4 sales, and 11 thousand vehicles, or 30.2%, 33.4%, caused by the downturn in the market 74 thousand vehicles, particularly in Thailand and billion. Excluding the difference in the Japanese in sales of the new Sienna. This increase was in during the first half of fiscal 2010 and the impact Indonesia, compared with the prior fiscal year yen value used for translation purposes of ¥212.9 spite of having influence by recalls and other of fluctuation in foreign currency translation rates due primarily to various government stimulus billion, net revenues would have increased by safety measures, such as the temporary decrease of ¥474.6 billion. packages, net revenues in Asia decreased due ¥148.6 billion. in retail sales of Toyota brand’s vehicle by 18 primarily to the unfavorable impact of fluctuations

Europe Other

Thousands of units Thousands of units Year ended March 31, 2010 vs. 2009 Change Year ended March 31, 2010 vs. 2009 Change 2009 2010 Amount Percentage 2009 2010 Amount Percentage Toyota’s consolidated vehicle unit sales 1,062 858 (204) −19.2% Toyota’s consolidated vehicle unit sales 1,443 1,139 (304) −21.1%

Yen in millions Yen in millions Year ended March 31, 2010 vs. 2009 Change Year ended March 31, 2010 vs. 2009 Change 2009 2010 Amount Percentage 2009 2010 Amount Percentage Net revenues: Net revenues: Sales of products ¥2,911,234 ¥2,065,768 ¥(845,466) −29.0% Sales of products ¥1,779,089 ¥1,571,846 ¥(207,243) −11.6% Financial services 101,894 81,281 (20,613) −20.2% Financial services 103,811 102,015 (1,796) −1.7% Total ¥3,013,128 ¥2,147,049 ¥(866,079) −28.7% Total ¥1,882,900 ¥1,673,861 ¥(209,039) −11.1%

TOYOTA ANNUAL REPORT 2011 57 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

Net revenues in Other decreased due to decreases of Toyota’s vehicle unit sales by 48 thousand Of the ¥32.3 billion increase in costs related accelerator pedals. The vehicle models involved vehicles in Central and South America, 10 thousand vehicles in Oceania, and 105 thousand vehicles to other recalls and safety measures taken during were Tundra, Sequoia, Avalon, Camry, Corolla, in Africa compared to the prior fiscal year as a result of a downturn in the markets. fiscal 2010, approximately ¥21.0 billion is Matrix, RAV4 and Highlander. As of the end of attributable to an accrual of additional costs in March 2011, approximately 89% of the Operating Costs and Expenses fiscal 2010 related to customer satisfaction approximately 2,500 thousand vehicles subject to measures with respect to Tacoma pick-up trucks this recall were remedied to address sticking and Yen in millions reflecting an update to the repair ratio, based on slow-to-return accelerator pedals. Year ended March 31, 2010 vs. 2009 Change 2009 2010 Amount Percentage fiscal 2010 repair experience, and the remainder Also in January 2010, Toyota announced a Operating costs and expenses is the result of an increased number of small-scale recall in Europe and China for certain models of Cost of products sold ¥17,468,416 ¥15,971,496 ¥(1,496,920) −8.6% recalls and other safety measures. Toyota vehicles related to sticking and Cost of financing operations 987,384 712,301 (275,083) −27.9% The following is a description of the four slow-to-return accelerator pedals. The vehicle Selling, general and administrative 2,534,781 2,119,660 (415,121) −16.4% recalls and other safety measures referenced models involved in Europe were Yaris, Verso, Total ¥20,990,581 ¥18,803,457 ¥(2,187,124) −10.4% above. Corolla, Auris, Aygo, RAV4, iQ and Avensis. In In fiscal 2010, Toyota experienced a significant China, the recall was limited to RAV4. As of the Yen in millions increase in the number of vehicles subject to end of March 2011, approximately 89% of the Changes in operating costs and expenses: 2010 vs. 2009 Change recalls and other safety measures. There were approximately 1,700 thousand vehicles subject to Effect of decrease in vehicle unit sales and changes in sales mix ¥ (110,000) over 14,000 thousand vehicles worldwide subject this recall in Europe, and approximately 99% of Effect of fluctuation in foreign currency translation rates (963,300) to recalls and other safety measures in fiscal the approximately 7,500 thousand vehicles subject Effect of increase in parts sales 11,200 Effect of decrease in research and development expenses (178,700) 2010, the majority of which occurred in the third to this recall in China, were remedied to address Effect of cost reduction efforts, decrease in fixed costs and other efforts (946,324) and fourth quarters of fiscal 2010 relating to the sticking and slow-to-return accelerator pedals. Total ¥(2,187,124) following four recalls and other safety measures. In February 2010, Toyota announced a In November 2009, Toyota announced a worldwide recall related to the software program Operating costs and expenses decreased by The ¥946.3 billion in cost reduction efforts, safety campaign in North America for certain that controls the anti-lock braking system (ABS) in ¥2,187.1 billion, or 10.4%, to ¥18,803.4 billion decrease in fixed costs and other efforts was models of Toyota and Lexus brands’ vehicles Prius, HS250h, Prius PHV and SAI. As of the end during fiscal 2010 compared with the prior fiscal partially offset by ¥97.0 billion net increase in related to floor mat entrapment of accelerator of March 2011, approximately 96% of the year. This decrease resulted primarily from the costs related to recalls and other safety measures pedals, and later expanded it to include additional approximately 430 thousand units subject to this ¥963.3 billion impact of fluctuations in foreign from fiscal 2009 to fiscal 2010. This net increase models. The vehicle models involved were Camry, recall received program updates. currency translation rates, the ¥520.0 billion includes a ¥105.7 billion increase in costs resulting Avalon, Prius, Tacoma, Tundra, ES350, IS250/350, As of the end of March 2011, a total of impact of cost reduction efforts, the ¥470.0 billion from a change in the estimation model used to Highlander, Corolla, Venza and Matrix. In addition, approximately 12.3 million remedies were decrease in fixed costs, the ¥178.7 billion record Toyota’s liability for recalls and other safety in March 2011, Toyota expanded the safety announced on vehicles subject to the above four decrease in research and development expenses, measures in fiscal 2010, an ¥89.0 billion increase campaign coverage to include additional models recalls and other safety measures. Total estimated and the approximately ¥110.0 billion impact of the resulting from the total estimated costs of the four to heighten the level of reassurance for customers. costs associated with the above four recalls and decrease in vehicle unit sales and the changes in recalls and other safety measures in fiscal 2010 The vehicle models involved were LX570, RAV4, other safety measures amounted to ¥89.0 billion sales mix, partially offset by the ¥11.2 billion as described below, and a ¥32.3 billion increase and 4Runner. As of the end of March 2011, for fiscal 2010. Of this amount, actual payments impact on increase in parts sales. The decrease in costs related to other recalls and safety approximately 58% of the approximately 7,600 incurred for fiscal 2010 amounted to ¥32.4 billion in fixed costs and other efforts are partially offset measures in fiscal 2010, offset by a decrease of thousand vehicles included in the campaign were yen. Specific types of costs involved include costs by the ¥105.7 billion increase in costs resulting approximately ¥130.0 billion related to customer remedied to address the potential issues. for parts, labor and costs related to loaner vehicles. from a change in the estimation model of expenses satisfaction measures with respect to certain In January 2010, Toyota announced a recall The net changes in the accrual for the four related to future recalls and other safety measures. Tacoma pick-up trucks in North America recorded in North America for certain models of Toyota recalls and other safety measures described in fiscal 2009 also described below. vehicles related to sticking and slow-to-return above consist of the following:

TOYOTA ANNUAL REPORT 2011 58 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

changes in sales mix, partially offset by the ¥9.0 translation rates, the ¥70.0 billion favorable Yen in millions Yen in millions Year ended March 31, Year ended March 31, billion impact of increases in parts sales. The impact of changes in funding costs, the ¥64.5 2010 2009 2010 2011 decrease in fixed costs was due mainly to the billion recognition of valuation gains on interest Balance at the beginning of year ¥ — Balance at the ¥178.7 billion decline in research and rate swaps stated at fair value, and the ¥50.0 Accrual 89,000 beginning of year ¥ — ¥ 57,500 ¥ 50,100 development expenses and the ¥39.1 billion billion decrease in provision for residual value Amounts paid (32,400) Accrual 130,000 21,000 — decline in labor costs as a result of profit losses. The favorable impact of changes in Balance at the end of year ¥ 56,600 Amounts paid (72,500) (28,400) (22,600) improvement initiatives. The decrease in vehicle funding costs is attributable to a decline in market Balance at the unit sales and the changes in sales mix were due interest rates. The decrease in provision for end of year ¥ 57,500 ¥ 50,100 ¥ 27,500 to factors such as the substantial contraction of residual value losses is primarily attributable to The following is a description of the customer the automotive market caused by the financial the recovery of the used vehicles markets satisfaction measures related to certain Tacoma Cost Reduction Efforts crisis since the fall of 2008. The decrease in particularly in the United States and other effects, pick-up trucks in North America referred to above. During fiscal 2010, continued cost reduction research and development expenses is partially offset by the impact from the recalls and In fiscal 2009, Toyota accrued the cost of the efforts reduced operating costs and expenses by attributable to reduced development costs other safety measures. Toyota judges this impact customer satisfaction measures related to Tacoma approximately ¥520.0 billion. The cost reduction realized as a result of Toyota’s more focused does not have a material impact on Toyota’s pick-up trucks in North America in order to efforts include decreases in the prices of steel, investment decisions for the future such as in consolidated financial statements though it is address the possibility of rust developing on the precious metals, non-ferrous alloys including environmental technologies, and effective difficult to quantify the impact from the recalls frame of a portion of older model Tacoma pick-up aluminum, plastic parts and other production management over research and development and other safety measures in residual value trucks manufactured in North America between materials and parts. In fiscal 2010, the decline in expenses spending. losses accurately. 1995 and 2004, by rendering repair services for a raw materials prices and, continued cost reduction portion of the vehicles and providing warranty efforts, by working closely with suppliers, Selling, General and Administrative Expenses extensions of up to 15 years to owners of contributed to the improvement in earnings. Cost of Financing Operations Selling, general and administrative expenses approximately 820 thousand vehicles, a portion These cost reduction efforts related to ongoing decreased by ¥415.1 billion, or 16.4%, to ¥2,119.6 Yen in millions of which may include vehicle buyback. value engineering and value analysis activities, billion during fiscal 2010 compared with the prior 2010 vs. 2009 Accordingly, the cost of approximately ¥130.0 the use of common parts that result in a reduction Change fiscal year. This decrease mainly reflects the billion was recorded in operating costs and of part types and other manufacturing initiatives Changes in cost of financing operations: ¥173.8 billion decrease for the financial services expenses in fiscal 2009. The repair ratio for these designed to reduce the costs of vehicle Effect of fluctuation in foreign operations and the ¥84.9 billion decrease of customer satisfaction measures to date has been production. currency translation rates ¥ (83,500) marketing expense. The decrease in the financial relatively low due primarily to the low rate of Effect of changes in funding costs (70,000) services operations is primarily due to the ¥140.0 incidence of rust on the frames of these vehicles Cost of Products Sold Effect of increase in valuation gains billion decrease in provision for credit losses and on interest rate swaps stated at which may occur when exposed to severe Cost of products sold decreased by ¥1,496.9 fair value (64,500) net charge-offs, which is attributable to the 0.46% environmental conditions including accumulation billion, or 8.6%, to ¥15,971.5 billion during fiscal Effect of decrease in provision for rise in the ratio of credit losses as a result of the residual value losses (50,000) of road salts. This low repair ratio was assumed in 2010 compared with the prior fiscal year. The economic downturn mainly in the United States in Other (7,083) the calculation of the accrual. decrease resulted primarily from the ¥738.5 the prior fiscal year, partially offset by the ¥37.3 Total ¥(275,083) The net changes in the accrual for the billion impact of fluctuations in foreign currency billion impact from the recalls and other safety customer satisfaction measures related to Tacoma translation rates, the ¥520.0 billion impact of cost measures. The decrease in marketing expense is pick-up trucks in North America described above reduction efforts, the ¥159.4 billion of decrease Cost of financing operations decreased by attributable to reduced marketing costs realized consist of the following: in fixed costs and other efforts including the ¥275.1 billion, or 27.9%, to ¥712.3 billion during as a result of the profit improvement initiatives. ¥178.7 billion decrease in research and fiscal 2010 compared with the prior year. The development expenses, and the ¥88.0 billion decrease resulted primarily from the ¥83.5 billion impact of the decrease in vehicle unit sales and impact of fluctuations in foreign currency

TOYOTA ANNUAL REPORT 2011 59 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

Operating Income and Loss During fiscal 2010, operating income (before North America Europe the elimination of intersegment profits), increased Yen in millions Yen in millions Yen in millions by ¥475.6 billion in North America, increased by 2010 vs. 2009 2010 vs. 2009 2010 vs. 2009 Change ¥27.5 billion, or 15.6%, in Asia, and increased by Change Change Changes in operating income and loss: ¥27.9 billion, or 31.9%, in Other compared with Changes in operating income and loss: Changes in operating income and loss: Effect of decrease in vehicle unit the prior fiscal year. During fiscal 2010, operating Effect of decrease in production Effect of decrease in production sales and changes in sales mix loss (before the elimination of intersegment profits) volume and vehicle unit sales and volume and vehicle unit sales and and other operational factors ¥(370,000) other operational factors ¥ (30,000) other operational factors ¥ (60,000) decreased by ¥12.3 billion in Japan and Effect of increase in parts sales 23,700 Effect of fluctuation in foreign Effect of fluctuation in foreign decreased by ¥110.3 billion in Europe compared (4,100) 4,900 Effect of fluctuation in foreign currency translation rates currency translation rates currency translation rates (23,600) with the prior fiscal year. Effect of cost reduction efforts, Effect of cost reduction efforts, Effect of decrease in research and decrease in fixed costs and other decrease in fixed costs and The following is a discussion of operating 509,782 165,378 development expenses 178,700 efforts other efforts income and loss in each geographic market. Effect of cost reduction efforts, Total ¥ 475,682 Total ¥110,278 decrease in fixed costs and other efforts 799,727 Japan Total ¥ 608,527 The increase in operating income in North Yen in millions The decrease in operating loss in Europe was America was due mainly to the ¥270.0 billion 2010 vs. 2009 mainly due to the ¥110.0 billion decrease in fixed Toyota’s operating income increased by ¥608.5 Change increase in operating income in the financial costs and the ¥10.0 billion impact of cost reduction billion to an operating income of ¥147.5 billion Changes in operating income and loss: services operations including the ¥150.0 billion efforts in the automotive operations, the ¥10.0 during fiscal 2010 compared with the prior year. Effect of decrease in production decrease in the provision for credit losses and net billion increase in operating income in the financial This operating income was favorably impacted by volume and vehicle unit sales in charge-offs and the ¥50.0 billion decrease in the the exported markets and other services business, the ¥4.9 billion impact of the effects of a ¥799.7 billion cost reduction efforts, operational factors ¥(325,000) provision for residual value losses of sales finance fluctuations in foreign currency translation rates, decrease in fixed costs and other efforts, the ¥178.7 Effect of cost reduction efforts, subsidiaries in the United States, the ¥130.0 billion and other efforts, partially offset by the ¥60.0 billion decrease in research and development decrease in fixed costs and decrease in fixed costs, the ¥50.0 billion impact other efforts 337,289 billion decrease of both production volume and expenses, and the ¥23.7 billion increase in parts of cost reduction efforts, and other efforts, partially Total ¥ 12,289 vehicle unit sales. The decreases in both sales, partially offset by the ¥380.0 billion decrease offset by the ¥40.0 billion impact of decreases in production volume and vehicle unit sales in in vehicle unit sales and the changes in sales mix. both production volume and vehicle unit sales Europe was attributable to the decline in vehicle The effect of cost reduction efforts, decrease in The decrease in operating losses in Japan was and the ¥4.1 billion impact of the fluctuations in unit sales by 204 thousand vehicles in the overall fixed costs and other efforts was favorably impacted mainly due to the ¥460.0 billion impact of cost foreign currency translation rates. The decreases European market compared to the prior fiscal by the ¥520.0 billion effect of cost reduction efforts, reduction efforts, the ¥230.0 billion decrease in fixed in both production volume and vehicle unit sales year despite sales growth in some of the countries the ¥291.3 billion decrease in fixed costs and other costs and other efforts in the automotive operations in North America are attributable to the substantial that benefited from government stimulus efforts excluding decrease in research and segment, partially offset by the ¥330.0 billion impact decline in vehicle unit sales by 453 thousand packages. development expenses and the ¥270.0 billion of decreases in both production volume and vehicle vehicles of commercial vehicles and passenger increase in operating income in the financial unit sales in the export markets and the ¥330.0 billion vehicles due to the downturn in the market in the services business, partially offset by the ¥320.0 effects of changes in exchange rates. The decreases first half of fiscal 2010. billion effects of changes in exchange rates. The in both production volume and vehicle unit sales in cost reduction efforts, decrease in fixed costs the export markets are attributable to the difficult and other efforts were also partially offset by the market conditions particularly in North America and ¥105.7 billion increase in costs resulting from a Europe. change in the estimation model of expenses related to future recalls and other safety measures.

TOYOTA ANNUAL REPORT 2011 60 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

Asia compared with the prior fiscal year. Foreign Net Income and Loss attributable to the Other Comprehensive Income and Loss exchange gains and losses include the differences Noncontrolling Interest and Equity in Other comprehensive income increased by Yen in millions between the value of foreign currency denominated Earnings of Affiliated Companies ¥1,127.4 billion to ¥260.9 billion for fiscal 2010 2010 vs. 2009 Change sales translated at prevailing exchange rates and Net income attributable to the noncontrolling compared with the prior fiscal year. This increase Changes in operating income and loss: the value of the sales amounts settled during the interest increased by ¥59.0 billion to ¥34.8 billion resulted primarily from unrealized holding gains Effect of increase in production year, including those settled using forward foreign during fiscal 2010 compared with the prior year. on securities in fiscal 2010 of ¥176.4 billion volume and vehicle unit sales and currency exchange contracts. During fiscal 2010, This increase was mainly due to an increase in compared with losses of ¥293.1 billion in the prior other operational factors ¥ 20,000 the currencies of various countries strengthened net income attributable to the shareholders of fiscal year, and from favorable foreign currency Effect of fluctuation in foreign currency translation rates (16,200) against the U.S. dollar rapidly. In such a situation, consolidated subsidiaries. translation adjustments of ¥9.8 billion in fiscal Effect of cost reduction efforts, Toyota records foreign exchange transaction Equity in earnings of affiliated companies 2010 compared with losses of ¥381.3 billion in the decrease in fixed costs and gains from accounts payable and long term U.S. during fiscal 2010 increased by ¥2.7 billion, or prior fiscal year. The increase in unrealized other efforts 23,667 Total ¥ 27,467 dollar denominated debt of subsidiaries. A main 6.3%, to ¥45.4 billion compared with the prior holding gains on securities was mainly due to the factor contributing to the significantly greater level fiscal year. This increase was due to an increase recognition of ¥139.6 billion impairment losses on of impact of foreign exchange on fiscal 2010 in net income attributable to the shareholders of certain available-for-sale securities in the prior The increase in operating income in Asia was results is that Toyota’s Canadian subsidiaries affiliated companies. fiscal year. mainly due to the ¥20.0 billion impact of increase recorded a ¥50.0 billion foreign exchange gain in production volume and vehicle unit sales and from long term debt payables in U.S. dollar to Net Income and Loss attributable to Toyota the ¥10.0 billion impact of cost reduction efforts in Toyota compared with the prior fiscal year, as the Motor Corporation the automotive operations segment, and other Canadian dollar strengthened against the U.S. Net income attributable to Toyota Motor efforts, partially offset by the ¥16.2 billion impact dollar rapidly during fiscal 2010. Corporation increased by ¥646.4 billion to ¥209.4 of fluctuations in foreign currency translation Other income, net increased by ¥220.0 billion billion during fiscal 2010 compared with the prior rates. The increase in production volume and the to ¥30.9 billion during fiscal 2010 compared with fiscal year. increase in vehicle unit sales by 74 thousand the prior fiscal year. This increase was mainly due vehicles in Asia compared to the prior fiscal year to the recognition of ¥139.6 billion impairment were primarily attributable to the recovery of Asian losses on certain available-for-sale securities in Segment Information automotive markets, particularly in Thailand and the prior fiscal year. The following is a discussion of results of operations for each of Toyota’s operating segments. The Indonesia, benefiting from the government amounts presented are prior to intersegment elimination. stimulus packages. Income Taxes The provision for income taxes increased by Yen in millions Other Income and Expenses ¥149.1 billion to ¥92.6 billion during fiscal 2010 Year ended March 31, 2010 vs. 2009 Change 2009 2010 Amount Percentage Interest and dividend income decreased by ¥60.2 compared with the prior year primarily due to the Net revenues ¥18,564,723 ¥17,197,428 ¥(1,367,295) −7.4% billion, or 43.5%, to ¥78.2 billion during fiscal 2010 increase in income before income taxes. The Automotive Operating income (loss) (394,876) (86,370) 308,506 — compared with the prior fiscal year mainly due to effective tax rate was 31.8%, which was lower Net revenues ¥ 1,377,548 ¥ 1,245,407 ¥ (132,141) −9.6% the ¥45.2 billion decrease in interest income than the statutory tax rate in Japan. This was Financial Services Operating income (loss) (71,947) 246,927 318,874 — reflecting decreases in market interest rates. primarily due to the ¥741.4 billion increase in Net revenues ¥ 1,184,947 ¥ 947,615 ¥ (237,332) −20.0% Interest expense decreased by ¥13.5 billion, income before income taxes of overseas All Other Operating income (loss) 9,913 (8,860) (18,773) — or 28.7%, to ¥33.4 billion during fiscal 2010 subsidiaries whose statutory tax rates were lower Intersegment elimination/ Net revenues ¥ (597,648) ¥ (439,477) ¥ 158,171 — compared with the prior fiscal year. than the statutory tax rate in Japan. unallocated amount: Operating income (loss) (4,101) (4,181) (80) — Foreign exchange gains, net increased by ¥70.0 billion to ¥68.2 billion during fiscal 2010

TOYOTA ANNUAL REPORT 2011 61 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

Automotive Operations Segment 9.6%, compared with the prior fiscal year to The decrease in residual value losses is unprecedented high in fiscal 2010, partially offset The automotive operations segment is Toyota’s ¥1,245.4 billion. This decrease was primarily due primarily attributable to the recovery in the used by the impact of increased sales incentives and largest operating segment by net revenues. Net to the unfavorable impact of fluctuations in foreign vehicle market, as prices of used vehicles moved other factors. revenues for the automotive segment decreased currency translation rates of ¥93.3 billion. Excluding from a historical low in fiscal 2009 to an during fiscal 2010 by ¥1,367.3 billion, or 7.4%, the difference in the Japanese yen value used for compared with the prior year to ¥17,197.4 billion. translation purposes, net revenues for its financial Ratio of credit loss experience in the United States is as follows: The decrease was primarily due to fluctuations in services operations would have been approximately Year ended March 31, foreign currency translation rates of ¥886.5 billion ¥1,338.7 billion during fiscal 2010, a 2.8% decrease 2009 2010 and decreased vehicle unit sales and the changes compared with the prior fiscal year. The decrease Net charge-offs as a percentage of average gross earning assets: in sales mix of approximately ¥570.0 billion, partially in net revenues excluding the difference in the Finance receivables 1.54% 1.15% offset by increased parts sales of ¥34.9 billion. Japanese yen value used for translation purposes Operating lease 0.86% 0.63% Operating loss from the automotive operations of ¥93.3 billion resulted primarily from the Total 1.37% 1.03% decreased by ¥308.5 billion during fiscal 2010 ¥63.5 billion decrease in rental income from compared with the prior year to an operating loss vehicles and equipment on operating leases. of ¥86.3 billion. This decrease in operating loss Operating income from financial services All Other Operations Segment was primarily due to the ¥520.0 billion impact of operations increased by ¥318.9 billion to ¥246.9 Net revenues for Toyota’s other operations segment decreased by ¥237.3 billion, or 20.0%, to ¥947.6 cost reduction efforts, the ¥470.0 billion decrease billion during fiscal 2010 compared with the prior billion during fiscal 2010 compared with the prior year. in fixed costs, the ¥23.7 billion impact of increase year. This increase was primarily due to the ¥140.0 Operating income from Toyota’s other operations segment decreased by ¥18.8 billion, to operating in parts sales, and other efforts, partially offset by billion decrease in provision for credit losses, net loss of ¥8.9 billion during fiscal 2010 compared with the prior year. a ¥380.0 billion decrease in vehicle unit sales and charge-offs, the ¥64.5 billion of the recognition of changes in sales mix and the ¥320.0 billion effects valuation gains on interest rate swaps stated at of changes in exchange rates. fair value, and the ¥50.0 billion decrease in The decrease in vehicle unit sales and provision for residual value losses. Outlook changes in sales mix was due primarily to a The decrease in provision for credit losses, decrease in vehicle unit sales by 330 thousand net charge-offs is primarily attributable to the While Toyota expects that emerging countries, purposes of this outlook discussion, Toyota is vehicles which resulted from the generally difficult ¥150.0 billion increase in provision for credit such as China and India, will continue to experi- assuming an average exchange rate of ¥82 to the market conditions in the automotive industry losses and net charge-offs in the United States ence economic growth, and that developed U.S. dollar and ¥115 to the euro. With the foregoing during fiscal 2010 compared with the prior fiscal primarily due to the 0.46% rise in the ratio of credit countries, including those in North America and external factors in mind, Toyota expects that net year. The decrease in fixed costs was due mainly losses as a result of the economic downturn in Europe, will continue to see gradual economic revenues for fiscal 2012 will decrease compared to the ¥178.7 billion decline in research and the prior fiscal year, partially offset by the ¥37.3 recovery in fiscal 2012, Toyota believes the impact with fiscal 2011 as a result of a decrease in vehicle development expenses and the ¥62.7 billion billion impact from the recalls and other safety and risks arising from increases in the price of unit sales and the assumed exchange rate of a decline in labor costs, as a result of profit measures. The decrease in provision for residual crude oil, continuing high unemployment rate in stronger Japanese yen against the U.S. dollar in improvement initiatives, partially offset by ¥105.7 value losses is primarily attributable to the North America and Europe, and other factors fiscal 2012 compared with the prior fiscal year. billion increase in costs resulting from a change in recovery in the used vehicle market, partially must be closely observed. Although Toyota With respect to operating income, factors the estimation model of expenses related to future offset by the impact from the recalls and other expects the automotive market to expand over increasing operating income include cost recalls and other safety measures. safety measures. Toyota judges this impact does the medium- to long-term particularly in emerging reduction efforts. On the other hand, factors not have a material impact on Toyota’s consolidated countries, the global competition in the automo- decreasing operating income include the Financial Services Operations Segment financial statements though it is difficult to quantify tive market has intensified, as shown in the small assumed exchange rate of a stronger Japanese Net revenues for the financial services operations the impact from the recalls and other safety and low-price vehicles markets and in the yen against the U.S. dollar in fiscal 2012 compared decreased during fiscal 2010 by ¥132.1 billion, or measures in residual value losses accurately. environmentally-friendly vehicles market. For with the prior fiscal year as well as decreases in

TOYOTA ANNUAL REPORT 2011 62 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

vehicle unit sales, which exceed the factors discussion. See “Information on the Company — Net Cash Provided by Capital Expenditures for Property, Cash and Cash Equivalents increasing operating income. As a result, Toyota Business Overview” for a more detailed Operating Activities and Plant and Equipment* and at End of Year Free Cash Flow* Depreciation expects that operating income will decrease in information of the Great East Japan Earthquake. (¥ Billion) (¥ Billion) (¥ Billion) fiscal 2012 compared with fiscal 2011. Also, The foregoing statements are forward-looking Net cash provided by Capital expenditures operating activities Depreciation 4,000 1,500 2,500 Toyota expects income before income taxes and statements based upon Toyota’s management’s Free cash flow equity in earnings of affiliated companies and net assumptions and beliefs regarding exchange 2,000 income attributable to Toyota Motor Corporation rates, market demand for Toyota’s products, 3,000 1,000 will decrease in fiscal 2012. Exchange rate economic conditions and others. See “Cautionary 1,500 fluctuations can materially affect Toyota’s Statement Concerning Forward-Looking 2,000 1,000 operating results. In particular, a strengthening of Statements”. Toyota’s actual results of operations 500 1,000 the Japanese yen against the U.S. dollar can could vary significantly from those described 500 have a material adverse effect on Toyota’s above as a result of unanticipated changes in the 0 0 0 operating results. See “Operating and Financial factors described above or other factors, including FY ‘07 ‘08 ‘09 ‘10 ‘11 FY ‘07 ‘08 ‘09 ‘10 ‘11 FY ‘07 ‘10‘09‘08 ‘11 Review and Prospects — Operating Results — those described in “Risk Factors”. * (Net cash provided by operating activities)- * Excluding vehicles and equipment on Overview — Currency Fluctuations” for further (Capital expenditures for property, plant operating leases and equipment, excluding vehicles and equipment on operating leases)

Liquidity and Capital Resources operations, and cash payments for income taxes, fiscal 2011, an increase of 4.1% over the ¥604.5 partially offset by an increase in cash collection billion in total capital expenditures during the prior Historically, Toyota has funded its capital expendi- leasing programs, from both cash generated by received from sale of products due to an increase fiscal year. The increase in capital expenditures tures and research and development activities operations and borrowings by its sales finance in net revenue for the automotive operations. resulted from an increase of investments in North through cash generated by operations. subsidiaries. Toyota seeks to expand its ability to Net cash used in investing activities was America and Asia. In fiscal 2012, Toyota expects to sufficiently raise funds locally in markets throughout the world ¥2,116.3 billion for fiscal 2011, compared with Total capital expenditures for vehicles and fund its capital expenditures and research and by expanding its network of finance subsidiaries. ¥2,850.1 billion for the prior fiscal year. The equipment on operating leases were ¥1,061.8 development activities through cash and cash Repurchasing of its own shares occurred at decrease in net cash used in investing activities billion during fiscal 2011, an increase of 27.5% equivalents on hand, and cash generated by an approximate total cost of ¥73 billion for fiscal resulted from an increase in sales and maturity of over the ¥833.0 billion in expenditures from the operations. Toyota will use its funds for the 2009. Toyota refrained from repurchasing of its marketable securities and security investments, prior fiscal year. The increase in expenditures for development of environment technologies, own shares for fiscal 2010 and 2011. Toyota has partially offset by an increase in purchases of vehicles and equipment on operating leases maintenance and replacement of manufacturing decided, for the time being, to refrain from marketable securities and security investments. resulted from an increase in investments in the facilities, and the introduction of new products. repurchasing its own shares, in order to prioritize Net cash provided by or used in financing financial services operations. See “Information on the Company — Business retention of cash reserves given the continued activities was a ¥434.3 billion increase for fiscal Toyota expects investments in property, plant Overview — Capital Expenditures and Divesti- uncertainties surrounding future global economy. 2011, compared with ¥277.9 billion decrease for and equipment, excluding vehicles and equipment tures” for information regarding Toyota’s material Net cash provided by operating activities was the prior fiscal year. The increase in net cash on operating leases, to be approximately ¥720.0 capital expenditures and divestitures for fiscal ¥2,024.0 billion for fiscal 2011, compared with provided by financing activities resulted from an billion during fiscal 2012. 2009, 2010 and 2011, and information concerning ¥2,558.5 billion for the prior fiscal year. The increase in short-term borrowings and decrease Based on current available information, Toyota Toyota’s principal capital expenditures and decrease in net cash provided by operating in repayment of long-term debt. does not expect environmental matters to have a divestitures currently in progress. activities resulted from an increase in cash Total capital expenditures for property, plant material impact on its financial position, results of Toyota funds its financing programs for payment to suppliers attributable to the increase and equipment, excluding vehicles and equipment operations, liquidity or cash flows during fiscal customers and dealers, including loans and in cost of products sold in the automotive on operating leases, were ¥629.3 billion during 2012. However, there exists uncertainty with

TOYOTA ANNUAL REPORT 2011 63 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

respect to Toyota’s obligations under current and Total finance receivables, net decreased Accrued expenses increased during fiscal Toyota’s long-term debt is rated “AA-” by future environment regulations as described in during fiscal 2011 by ¥146.6 billion, or 1.5%, to 2011 by ¥37.4 billion, or 2.1%, reflecting the Standard & Poor’s Ratings Group, “Aa2” by “Information on the Company — Business ¥9,693.5 billion. The decrease in finance increase in expenses related to the recalls and Moody’s Investors Services and “AAA” by Rating Overview — Governmental Regulations, Environ- receivables, net is due to fluctuations in foreign other safety measures. and Investment Information, Inc., as of May 31, mental and Safety Standards”. currency translation rates. As of March 31, 2011, Income taxes payable decreased during 2011. However, Moody’s Investors Services has Cash and cash equivalents were ¥2,080.7 finance receivables were geographically fiscal 2011 by ¥40.6 billion, or 26.5%, as a result announced that it is considering the reduction of billion as of March 31, 2011. Most of Toyota’s cash distributed as follows: in North America 59.0%, in of a decrease of income taxes payable at overseas Toyota’s long-term debt rating. A credit rating is and cash equivalents are held in Japanese yen Japan 12.7%, in Europe 10.4%, in Asia 5.8% and subsidiaries. not a recommendation to buy, sell or hold and in U.S. dollars. In addition, time deposits in Other 12.1%. Toyota’s total borrowings decreased during securities. A credit rating may be subject to were ¥203.9 billion and marketable securities Marketable securities and other securities fiscal 2011 by ¥112.4 billion, or 0.9%. Toyota’s withdrawal or revision at any time. Each rating were ¥1,225.4 billion as of March 31, 2011. investments, including those included in current short-term borrowings consist of loans with a should be evaluated separately of any other rating. Liquid assets, which Toyota defines as cash assets, increased during fiscal 2011 by ¥747.1 weighted-average interest rate of 1.57% and Toyota’s unfunded pension liabilities and cash equivalents, time deposits, marketable billion, or 18.5%, reflecting purchase of marketable commercial paper with a weighted-average decreased during fiscal 2011 by ¥1.9 billion, or debt securities and its investment in monetary securities and security investments, and an interest rate of 0.67%. Short-term borrowings 0.3%, to ¥545.7 billion. The unfunded pension trust funds, increased during fiscal 2011 by increase in the fair values of common stocks. decreased during fiscal 2011 by ¥100.6 billion, or liabilities relate to the parent company and its ¥665.0 billion, or 12.6%, to ¥5,963.2 billion. Property, plant and equipment decreased 3.1%, to ¥3,179.0 billion. Toyota’s long-term debt overseas subsidiaries. The unfunded amounts Trade accounts and notes receivable, less during fiscal 2011 by ¥401.8 billion, or 6.0%, consists of unsecured and secured loans, will be funded through future cash contributions allowance for doubtful accounts decreased primarily reflecting the impacts of depreciation medium-term notes, unsecured notes and by Toyota or in some cases will be settled on the during fiscal 2011 by ¥437.0 billion, or 23.2%, to charges during the year and fluctuations in foreign long-term capital lease obligations with interest retirement date of each covered employee. The ¥1,449.2 billion. This decrease was due to the currency translation rates, partially offset by the rates ranging from 0.00% to 29.00%, and maturity unfunded pension liabilities decreased in fiscal decrease in the volume of sales in the second capital expenditures. dates ranging from 2011 to 2050. The current 2011 compared with the prior fiscal year due to half of fiscal 2011. Accounts and notes payable decreased portion of long-term debt increased during fiscal changes of pension plans in subsidiaries. See Inventories decreased during fiscal 2011 by during fiscal 2011 by ¥453.4 billion, or 23.2%. This 2011 by ¥554.5 billion, or 25.0%, to ¥2,772.8 billion note 19 to the consolidated financial statements ¥118.1 billion, or 8.3%, to ¥1,304.2 billion. decrease was due to the decrease in production and the non-current portion decreased by ¥566.2 for further discussion. volume in the second half of fiscal 2011. billion, or 8.1%, to ¥6,449.2 billion. The decrease Toyota’s treasury policy is to maintain controls in total borrowings resulted from the decrease in on all exposures, to adhere to stringent medium-term notes and short-term borrowings, counterparty credit standards, and to actively partially offset by increase in long-term borrowings. monitor marketplace exposures. Toyota remains Liquid Assets* Shareholders’ Equity and Equity Ratio As of March 31, 2011, approximately 31% of centralized, and is pursuing global efficiency of its (¥ Billion) (¥ Billion) (%) Equity ratio long-term debt was denominated in Japanese financial services operations through Toyota 6,000 15,000 100 (Right scale) yen, 24% in U.S. dollars, 12% in the euros and Financial Services Corporation. 5,000 12,000 80 33% in other currencies. Toyota hedges interest The key element of Toyota’s financial strategy

4,000 rate risk exposure of fixed-rate borrowings by is maintaining a strong financial position that will 9,000 60 entering into interest rate swaps. There are no allow Toyota to fund its research and development 3,000 6,000 40 material seasonal variations in Toyota’s borrowings initiatives, capital expenditures and financial 2,000 requirements. services operations efficiently even if earnings 3,000 20 1,000 As of March 31, 2011, Toyota’s total interest experience short-term fluctuations. Toyota 0 0 0 bearing debt was 120.0% of Toyota Motor believes that it maintains sufficient liquidity for its FY ‘07 ‘08 ‘09 ‘10 ‘11 FY ‘07 ‘08 ‘09 ‘10 ‘11 Corporation shareholders’ equity, compared with present requirements and that by maintaining its * Cash and cash equivalents, time deposits, marketable debt 120.8% as of March 31, 2010. high credit ratings, it will continue to be able to securities and investment in monetary trust funds

TOYOTA ANNUAL REPORT 2011 64 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

access funds from external sources in large general economic conditions in Japan and the Guarantees useful lives of products sold. Toyota is required to amounts and at relatively low costs. Toyota’s other major markets in which Toyota does Toyota enters into certain guarantee contracts execute its guarantee primarily when customers ability to maintain its high credit ratings is subject business, as well as Toyota’s successful with its dealers to guarantee customers’ payments are unable to make required payments. to a number of factors, some of which are not implementation of its business strategy. of their installment payables that arise from The maximum potential amount of future within Toyota’s control. These factors include installment contracts between customers and payments as of March 31, 2011 is ¥1,662.2 billion. Toyota dealers, as and when requested by Toyota Liabilities for these guarantees of ¥20.4 billion dealers. Guarantee periods are set to match the have been provided as of March 31, 2011. Under maturity of installment payments, and as of March these guarantee contracts, Toyota is entitled to Off-Balance-Sheet Arrangements 31, 2011, ranged from one month to 35 years. recover any amounts paid by it from the customers However, they are generally shorter than the whose obligations it guaranteed. Toyota uses its securitization program as part of purpose entities and therefore consolidates them. its funding through special purpose entities for its Toyota has not entered into any off-balance sheet financial services operations. Toyota is consid- securitization transactions during fiscal 2011. Contractual Obligations and Commitments ered the primary beneficiary of these special For information regarding debt obligations, capital suppliers for purchases of certain raw materials, lease obligations, operating lease obligations and components and services. These arrangements Lending Commitments other obligations, including amounts maturing in may contain fixed/minimum quantity purchase each of the next five years, see notes 13, 22 and 23 requirements. Toyota enters into such arrange- Credit Facilities with Credit Card Holders may be used for business acquisitions, facilities to the consolidated financial statements. In addition, ments to facilitate an adequate supply of these Toyota’s financial services operations issue credit refurbishment, real estate purchases, and working as part of Toyota’s normal business practices, materials and services. cards to customers. As customary for credit card capital requirements. These loans are typically Toyota enters into long-term arrangements with businesses, Toyota maintains credit facilities with collateralized with liens on real estate, vehicle holders of credit cards issued by Toyota. These inventory, and/or other dealership assets, as facilities are used upon each holder’s requests up appropriate. Toyota obtains a personal guarantee The following tables summarize Toyota’s contractual obligations and commercial commitments as of to the limits established on an individual holder’s from the dealer or corporate guarantee from the March 31, 2011. basis. Although loans made to customers through dealership when deemed prudent. Although the Yen in millions these facilities are not secured, for the purposes loans are typically collateralized or guaranteed, the Payments Due by Period of minimizing credit risks and of appropriately value of the underlying collateral or guarantees Less than 1 to 3 3 to 5 5 years establishing credit limits for each individual credit may not be sufficient to cover Toyota’s exposure Total 1 year years years and after card holder, Toyota employs its own risk manage- under such agreements. Toyota prices the credit Contractual Obligations: ment policy which includes an analysis of facilities according to the risks assumed in entering Short-term borrowings (note 13) information provided by financial institutions in into the credit facility. Toyota’s financial services Loans ¥ 1,140,066 ¥1,140,066 ¥ — ¥ — ¥ — alliance with Toyota. Toyota periodically reviews operations also provide financing to various Commercial paper 2,038,943 2,038,943 — — — and revises, as appropriate, these credit limits. multi-franchise dealer organizations, referred to as Long-term debt* (note 13) 9,200,130 2,768,544 3,368,754 1,995,139 1,067,693 Outstanding credit facilities with credit card dealer groups, often as part of a lending consortium, Capital lease obligations (note 13) 21,917 4,283 4,751 2,977 9,906 holders were ¥261.7 billion as of March 31, 2011. for wholesale inventory financing, business Non-cancelable operating lease obligations (note 22) 44,179 9,198 13,126 8,709 13,146 acquisitions, facilities refurbishment, real estate Commitments for the purchase of property, Credit Facilities with Dealers purchases, and working capital requirements. plant and other assets (note 23) 83,506 37,304 25,513 6,262 14,427 Toyota’s financial services operations maintain Toyota’s outstanding credit facilities with dealers Total ¥12,528,741 ¥5,998,338 ¥3,412,144 ¥2,013,087 ¥1,105,172

credit facilities with dealers. These credit facilities totaled ¥1,590.6 billion as of March 31, 2011. * “Long-term debt” represents future principal payments.

TOYOTA ANNUAL REPORT 2011 65 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

Toyota is unable to make reasonable estimates the table above. See note 16 to the consolidated Recent Accounting Pronouncements in the United States of the period of cash settlement with respect to financial statements for further discussion. liabilities recognized for uncertain tax benefits, Toyota expects to contribute ¥97,231 million In October 2009, the Financial Accounting In April 2011, FASB issued updated guidance and accordingly such liabilities are excluded from to its pension plans in fiscal 2012. Standards Board (“FASB”) issued updated to clarify the accounting for and disclosures about guidance of accounting for and disclosure of troubled debt restructurings by creditors. This Yen in millions Revenue Recognition with Multiple Deliverables. guidance provides the criteria as to whether a Total Amount of Commitment Expiration Per Period This guidance allows the use of estimated selling loan modification constitutes a troubled debt amounts Less than 1 to 3 3 to 5 5 years price for determining the selling price of deliver- restructuring and requires additional disclosures committed 1 year years years and after ables, eliminates the residual method of allocation about troubled debt restructurings. This guidance Commercial Commitments (note 23): and expands the disclosures related to a vendor’s is effective for the interim period or the fiscal year Maximum potential exposure to guarantees given in the ordinary course of business ¥1,662,225 ¥469,543 ¥744,991 ¥316,508 ¥131,183 multiple-deliverable revenue arrangements. This beginning on or after June 15, 2011, and shall be Total Commercial Commitments ¥1,662,225 ¥469,543 ¥744,991 ¥316,508 ¥131,183 guidance is effective prospectively for revenue applied retrospectively to the beginning of the arrangements entered into or materially modified fiscal year of adoption. Management does not in fiscal year beginning on or after June 15, 2010. expect this guidance to have a material impact on Management does not expect this guidance to Toyota’s consolidated financial statements. have a material impact on Toyota’s consolidated Related Party Transactions financial statements.

Toyota does not have any significant related party transactions other than transactions with affiliated companies in the ordinary course of business. See note 12 to the consolidated financial statements for further discussion. Critical Accounting Estimates

The consolidated financial statements of Toyota for product warranties are provided for specific are prepared in conformity with accounting periods of time and/or usage of the product and Legislation Regarding End-of-Life Vehicles principles generally accepted in the United States vary depending upon the nature of the product, of America. The preparation of these financial the geographic location of the sale and other In October 2000, the European Union enforced a market after December 15, 2008 shall be statements requires the use of estimates, factors. All product warranties are consistent with directive that requires member states to promul- re-usable and/or recyclable to a minimum judgments and assumptions that affect the commercial practices. Toyota includes a provision gate regulations implementing the following: of 85% by weight per vehicle and shall be reported amounts of assets and liabilities at the for estimated product warranty costs as a • manufacturers shall bear all or a significant re-usable and/or recoverable to a minimum date of the financial statements and the reported component of cost of sales at the time the related part of the costs for taking back end-of-life of 95% by weight per vehicle; and amounts of revenues and expenses during the sale is recognized. The accrued warranty costs vehicles put on the market after July 1, 2002 • end-of-life vehicles must meet actual re-use periods presented. Toyota believes that of its represent management’s best estimate at the and dismantling and recycling those vehicles. of 80% and re-use as material or energy of significant accounting policies, the following may time of sale of the total costs that Toyota will incur Beginning January 1, 2007, this requirement 85%, respectively, of vehicle weight by involve a higher degree of judgments, estimates to repair or replace product parts that fail while will also be applicable to vehicles put on the 2006, rising to 85% and 95%, respectively, and assumptions: still under warranty. The amount of accrued market before July 1, 2002; by 2015. estimated warranty costs is primarily based on • manufacturers may not use certain Product Warranties and Recalls and historical experience of product failures as well as hazardous materials in vehicles sold after See note 23 to the consolidated financial Other Safety Measures current information on repair costs. The amount of July 2003; statements for further discussion. Toyota generally warrants its products against warranty costs accrued also contains an estimate • vehicles type-approved and put on the certain manufacturing and other defects. Provisions of warranty claim recoveries to be received from

TOYOTA ANNUAL REPORT 2011 66 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

suppliers. The foregoing evaluations are inherently costs of recalls and other safety measures. considers the allowance for doubtful accounts for credit losses is evaluated at least quarterly, uncertain, as they require material estimates and Toyota accrues for cost of recalls and other and credit losses to be adequate based on considering a variety of assumptions and factors some products’ warranties extend for several safety measures based on the average repair information currently available, additional to determine whether reserves are considered years. Consequently, actual warranty costs may cost per unit and pattern of payment occurrence provisions may be necessary due to (i) changes adequate to cover probable losses. The following differ from the estimated amounts and could in the past at the time of product sale. The average in management estimates and assumptions about table illustrates the effect of an assumed change require additional warranty provisions. If these repair cost per unit is calculated based on histor- asset impairments, (ii) information that indicates in frequency of occurrence or expected severity factors require a significant increase in Toyota’s ical expenses incurred in relation of recalls and changes in expected future cash flows, or (iii) of loss mainly in the United States, assuming all accrued estimated warranty costs, it would other safety measures. changes in economic and other events and other assumptions are held consistent respec- negatively affect future operating results of the Factors that may bring material uncertainties conditions. To the extent that sales incentives tively. The table below represents the impact on automotive operations. to the estimated or actual amount include the remain an integral part of sales promotion with the the allowance for credit losses in Toyota’s financial An estimate of warranty claim accrued for important changes in the average repair cost for effect of reducing new vehicle prices, resale services operations of the change in frequency of each fiscal year is calculated based on the products. prices of used vehicles and, correspondingly, the occurrence or expected severity of loss as any estimate of warranty claim per unit. The estimate collateral value of Toyota’s retail receivables and change impacts most significantly on the financial of warranty claim per unit is calculated by dividing Allowance for Doubtful Accounts and finance lease receivables could experience services operations. the actual amounts of warranty claim, net of claim Credit Losses further downward pressure. If these factors Yen in millions recovery cost received from suppliers, by the Natures of estimates and assumptions require a significant increase in Toyota’s allowance Effect on the allowance number of sales units for the fiscal year. Retail receivables and finance lease receivables for doubtful accounts and credit losses, it could for credit losses As the historical recovery amounts received consist of retail installment sales contracts negatively affect future operating results of the as of March 31, 2011 from suppliers is used as a factor in Toyota’s secured by passenger cars and commercial financial services operations. The level of credit 10 percent change in frequency of occurrence or expected severity calculation of estimated accrued warranty cost, vehicles. Collectability risks include consumer losses, which has a greater impact on Toyota’s of loss ¥6,153 the estimated accrued warranty cost may change and dealer insolvencies and insufficient collateral results of operations, is influenced by two factors: depending on the average recovery amounts values (less costs to sell) to realize the full carrying frequency of occurrence and expected severity received from suppliers in the past. However, values of these receivables. As a matter of policy, of loss. For evaluation purposes, exposures to Investment in Operating Leases Toyota believes that there is not a significant Toyota maintains an allowance for doubtful credit losses are segmented into the two primary Natures of estimates and assumptions uncertainty of estimated amounts based on accounts and credit losses representing manage- categories of “consumer” and “dealer”. Toyota’s Vehicles on operating leases, where Toyota is the historical experience regarding recoveries ment’s estimate of the amount of asset impairment “consumer” category consists of smaller balances lessor, are valued at cost and depreciated over received from suppliers. Toyota may seek in the portfolios of finance, trade and other receiv- that are homogenous retail receivables and their estimated useful lives using the straight-line recovery to suppliers over the life of the warranty, ables. Toyota determines the allowance for finance lease receivables. The “dealer” category method to their estimated residual values. Toyota and there are no other significant special terms doubtful accounts and credit losses based on a consists of wholesale and other dealer loan utilizes industry published information and its own and conditions including cap on amounts that systematic, ongoing review and evaluation receivables. The overall allowance for credit historical experience to determine estimated can be recovered. performed as part of the credit-risk evaluation losses is evaluated at least quarterly, considering residual values for these vehicles. Toyota Toyota accrues for costs of recalls and other process, historical loss experience, the size and a variety of assumptions and factors to determine evaluates the recoverability of the carrying values safety measures, as well as product warranty cost composition of the portfolios, current economic whether reserves are considered adequate to of its leased vehicles for impairment when there described above, included as a component of events and conditions, the estimated fair value cover probable losses. are indications of declines in residual values, and cost of sales, at the time of vehicle sale based on and adequacy of collateral, and other pertinent if impaired, Toyota recognizes an allowance for the amount estimated from historical experience factors. This evaluation is inherently judgmental Sensitivity analysis losses on its residual values. with consideration of individual occurrences of and requires material estimates, including the The level of credit losses, which could significantly Throughout the life of the lease, management recalls and other safety measures. amounts and timing of future cash flows expected impact Toyota’s results of operations, is influenced performs periodic evaluations of estimated end-of- Below are the important factors, judgments to be received, which may be susceptible to by two factors: frequency of occurrence and term fair values to determine whether estimates and assumptions taken into accounts for estimating significant change. Although management expected severity of loss. The overall allowance used in the determination of the contractual

TOYOTA ANNUAL REPORT 2011 67 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

residual value are still considered reasonable. Sensitivity analysis Pension Costs and Obligations quality fixed income bonds or fixed income Factors affecting the estimated residual value at The following table illustrates the effect of an Natures of estimates and assumptions governmental bonds currently available and lease maturity include, but are not limited to, new assumed change in the vehicle return rate and Pension costs and obligations are dependent on expected to be available during the period to vehicle incentive programs, new vehicle pricing, end-of-term market values, which Toyota believes assumptions used in calculating such amounts. maturity of the defined benefit pension plans. used vehicle supply, projected vehicle return are the critical estimates, in determining the These assumptions include discount rates, Toyota determines the expected rates of return for rates, and projected loss severity. The vehicle residual value losses, holding all other assump- benefits earned, interest costs, expected rate of pension assets after considering several return rate represents the number of leased tions constant. The following table represents the return on plan assets, mortality rates and other applicable factors including, the composition of vehicles returned at contract maturity and sold by impact on the residual value losses in Toyota’s factors. Actual results that differ from the assump- plan assets held, assumed risks of asset manage- Toyota during the period as a percentage of the financial services operations of the change in tions are accumulated and amortized over future ment, historical results of the returns on plan number of lease contracts that, as of their origina- vehicle return rate and end-of-term market values periods and, therefore, generally affect recognized assets, Toyota’s principal policy for plan asset tion dates, were scheduled to mature in the same as those changes have a significant impact on expense in future periods. While management management, and forecasted market conditions. period. A higher rate of vehicle returns exposes financial services operations. believes that the assumptions used are A weighted-average discount rate of 2.8% and a Toyota to higher potential losses incurred at lease appropriate, differences in actual experience or weighted-average expected rate of return on plan Yen in millions termination. Severity of loss is the extent to which changes in assumptions may affect Toyota’s assets of 3.8% are the results of assumptions Effect on the residual the end-of-term fair value of a lease is less than its value losses over the pension costs and obligations. used for the various pension plans in calculating remaining terms of the carrying value at lease end. operating leases on and The two most critical assumptions impacting Toyota’s consolidated pension costs for fiscal To the extent that sales incentives remain an after April 1, 2011 the calculation of pension costs and obligations 2011. Also, a weighted-average discount rate of integral part of sales promotion, resale prices of 1 percent increase in vehicle are the discount rates and the expected rates of 2.8% is the result of assumption used for the return rate ¥1,164 used vehicles and, correspondingly, the fair value returns on plan assets. Toyota determines the various pension plans in calculating Toyota’s 1 percent increase in end-of-term of Toyota’s leased vehicles could be subject to market values ¥4,490 discount rates mainly based on the rates of high consolidated pension obligations for fiscal 2011. downward pressure. The extent of the impact this will have on the end of term residual value depends on the significance of the incentive programs and Impairment of Long-Lived Assets Sensitivity analysis whether they are sustained over a number of Toyota periodically reviews the carrying value of The following table illustrates the effects of assumed changes in weighted-average discount rates and periods. This in turn can impact the projection of its long-lived assets held and used and assets to the weighted-average expected rate of return on plan assets, which Toyota believes are critical estimates future used vehicle values, adversely impacting be disposed of, including intangible assets, when in determining pension costs and obligations, assuming all other assumptions are consistent. the expected residual value of the current events and circumstances warrant such a review. Yen in millions operating lease portfolio and increasing the This review is performed using estimates of future Effect on pre-tax income for Effect on PBO provision for residual value losses. However, cash flows. If the carrying value of a long-lived the year ended March 31, 2012 as of March 31, 2011 various other factors impact used vehicle values asset is considered impaired, an impairment Discount rates and the projection of future residual values, charge is recorded for the amount by which the 0.5% decrease ¥(10,325) ¥ 124,789 including the supply of and demand for used carrying value of the long-lived asset exceeds its 0.5% increase 9,845 (115,671) vehicles, interest rates, inflation, the actual or fair value. Management believes that the estimates Expected rate of return on plan assets perceived quality, safety and reliability of vehicles, of future cash flows and fair values are reason- 0.5% decrease ¥ (5,917) the general economic outlook, new vehicle pricing, able. However, changes in estimates of such 0.5% increase 5,917 projected vehicle return rates and projected loss cash flows and fair values would affect the evalua- severity, which may offset this effect. Such factors tions and negatively affect future operating results Derivatives and Other Contracts at Fair Value are highly likely to adversely affect the results of of the automotive operations. Toyota uses derivatives in the normal course of for derivatives is complex and continues to evolve. operations for financial services due to significant business to manage its exposure to foreign currency In addition, there are significant judgments and charges reducing the estimated residual value. exchange rates and interest rates. The accounting estimates involved, using information from

TOYOTA ANNUAL REPORT 2011 68 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management's Discussion and Analysis of Financial Condition and Results of Operations

counterparties or market, in estimating fair value in company and Toyota’s ability and intent to retain than the local currencies in which it operates. instantaneous parallel shifts in the yield curve. the absence of quoted market values. These its investment in the company for a period of time Toyota is exposed to foreign currency risk related However, in reality, changes are rarely estimates are based upon valuation methodologies sufficient to allow for any anticipated recovery in to future earnings or assets and liabilities that are instantaneous. Although certain assets and deemed appropriate under the circumstances. fair value. exposed due to operating cash flows and various liabilities may have similar maturities or periods to However, the use of different assumptions may have financial instruments that are denominated in repricing, they may not react correspondingly to a material effect on the estimated fair value amounts. Deferred Tax Assets foreign currencies. Toyota’s most significant changes in market interest rates. Also, the interest Toyota estimates whether future taxable income is foreign currency exposures relate to the U.S. rates on certain types of assets and liabilities may Marketable Securities and Investments in sufficient at a particular tax-paying component dollar and the euro. fluctuate with changes in market interest rates, Affiliated Companies and records valuation allowances to reduce Toyota uses a value-at-risk analysis (“VAR”) while interest rates on other types of assets may Toyota’s accounting policy is to record a write- deferred tax assets when it is more likely than not to evaluate its exposure to changes in foreign lag behind changes in market rates. Finance down of such investments to net realizable value that a tax benefit will not be realized in the future currency exchange rates. The VAR of the receivables are less susceptible to prepayments when a decline in fair value below the carrying periods. Actual taxable income may differ from the combined foreign exchange position represents when interest rates change and, as a result, value is other-than-temporary. In determining if a estimated amounts due to various assumptions a potential loss in pre-tax earnings that was Toyota’s model does not address prepayment decline in value is other-than-temporary, Toyota used to estimate future taxable income. If additional estimated to be ¥148.9 billion and ¥107.6 billion at risk for automotive related finance receivables. considers the length of time and the extent to valuation allowance is recorded due to lower actual March 31, 2010 and 2011, respectively. Based on However, in the event of a change in interest rates, which the fair value has been less than the carrying taxable income than estimated amounts it would Toyota’s overall currency exposure (including actual loan prepayments may deviate significantly value, the financial condition and prospects of the negatively affect future operating results. derivative positions), the risk during fiscal 2011 to from the assumptions used in the model. pre-tax cash flow from currency movements was on average ¥96.5 billion, with a high of ¥107.6 Commodity Price Risk Market Risk Disclosures billion and a low of ¥88.2 billion. Commodity price risk is the possibility of higher The VAR was estimated by using a Monte or lower costs due to changes in the prices of Toyota is exposed to market risk from changes in market risk analysis consist of all of Toyota’s cash Carlo Simulation Method and assumed a 95% commodities, such as non-ferrous alloys (e.g., foreign currency exchange rates, interest rates, and cash equivalents, marketable securities, confidence level on the realization date and a aluminum), precious metals (e.g., palladium, certain commodity and equity security prices. In finance receivables, securities investments, 10-day holding period. platinum and rhodium) and ferrous alloys, which order to manage the risk arising from changes in long-term and short-term debt and all derivative Toyota uses in the production of motor vehicles. foreign currency exchange rates and interest financial instruments. Toyota’s portfolio of deriva- Interest Rate Risk Toyota does not use derivative instruments to rates, Toyota enters into a variety of derivative tive financial instruments consists of forward Toyota is subject to market risk from exposures to hedge the price risk associated with the purchase financial instruments. foreign currency exchange contracts, foreign changes in interest rates based on its financing, of those commodities and controls its commodity A description of Toyota’s accounting policies currency options, interest rate swaps, interest rate investing and cash management activities. Toyota price risk by holding minimum stock levels. for derivative instruments is included in note 2 to currency swap agreements and interest rate enters into various financial instrument transactions the consolidated financial statements and further options. Anticipated transactions denominated in to maintain the desired level of exposure to the Equity Price Risk disclosure is provided in notes 20 and 21 to the foreign currencies that are covered by Toyota’s risk of interest rate fluctuations and to minimize Toyota holds investments in various available-for- consolidated financial statements. derivative hedging are not included in the market interest expense. The potential decrease in fair sale equity securities that are subject to price risk. Toyota monitors and manages these financial risk analysis. Although operating leases are not value resulting from a hypothetical 100 basis point The fair value of available-for-sale equity securities exposures as an integral part of its overall risk required to be included, Toyota has included upward shift in interest rates would be was ¥852.7 billion as of March 31, 2010 and management program, which recognizes the these instruments in determining interest rate risk. approximately ¥67.8 billion as of March 31, 2010 ¥960.2 billion as of March 31, 2011. The potential unpredictability of financial markets and seeks to and ¥139.6 billion as of March 31, 2011. change in the fair value of these investments, reduce the potentially adverse effects on Toyota’s Foreign Currency Exchange Rate Risk There are certain shortcomings inherent to assuming a 10% change in prices, would be operating results. Toyota has foreign currency exposures related to the sensitivity analyses presented. The model approximately ¥85.3 billion as of March 31, 2010 The financial instruments included in the buying, selling and financing in currencies other assumes that interest rate changes are and ¥96.0 billion as of March 31, 2011.

TOYOTA ANNUAL REPORT 2011 69 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Balance Sheets

Toyota Motor Corporation March 31, 2010 and 2011

Yen in millions U.S. dollars in millions Yen in millions U.S. dollars in millions ASSETS 2010 2011 2011 LIABILITIES AND SHAREHOLDERS’ EQUITY 2010 2011 2011 Current assets Current liabilities Cash and cash equivalents ¥ 1,865,746 ¥ 2,080,709 $ 25,024 Short-term borrowings ¥ 3,279,673 ¥ 3,179,009 $ 38,232 Time deposits 392,724 203,874 2,452 Current portion of long-term debt 2,218,324 2,772,827 33,347 Marketable securities 1,793,165 1,225,435 14,738 Accounts payable 1,956,505 1,503,072 18,077 Trade accounts and notes receivable, less allowance Other payables 572,450 579,326 6,967 for doubtful accounts of ¥13,735 million in 2010 Accrued expenses 1,735,930 1,773,233 21,326 and ¥11,856 million ($143 million) in 2011 1,886,273 1,449,151 17,428 Income taxes payable 153,387 112,801 1,357 Finance receivables, net 4,209,496 4,136,805 49,751 Other current liabilities 769,945 870,722 10,472 Other receivables 360,379 306,201 3,682 Total current liabilities 10,686,214 10,790,990 129,778 Inventories 1,422,373 1,304,242 15,685 Deferred income taxes 632,164 605,884 7,287 Prepaid expenses and other current assets 511,284 517,454 6,223 Long-term liabilities Total current assets 13,073,604 11,829,755 142,270 Long-term debt 7,015,409 6,449,220 77,561 Accrued pension and severance costs 678,677 668,022 8,034 Noncurrent finance receivables, net 5,630,680 5,556,746 66,828 Deferred income taxes 813,221 810,127 9,743 Other long-term liabilities 225,323 179,783 2,162 Investments and other assets Total long-term liabilities 8,732,630 8,107,152 97,500 Marketable securities and other securities investments 2,256,279 3,571,187 42,949 Affiliated companies 1,879,320 1,827,331 21,976 Employees receivables 67,506 62,158 748 Shareholders’ equity Other 730,997 661,829 7,959 Toyota Motor Corporation shareholders' equity Total investments and other assets 4,934,102 6,122,505 73,632 Common stock, no par value, authorized: 10,000,000,000 shares in 2010 and 2011; issued: 3,447,997,492 shares in 2010 and 2011 397,050 397,050 4,775 Property, plant and equipment Additional paid-in capital 501,331 505,760 6,083 Land 1,261,349 1,237,620 14,884 Retained earnings 11,568,602 11,835,665 142,341 Buildings 3,693,972 3,635,605 43,724 Accumulated other comprehensive income (loss) (846,835) (1,144,721) (13,767) Machinery and equipment 9,298,967 8,947,350 107,605 Treasury stock, at cost, 312,002,149 shares in 2010 Vehicles and equipment on operating leases 2,613,248 2,491,946 29,969 and 312,298,805 shares in 2011 (1,260,425) (1,261,383) (15,170) Construction in progress 226,212 298,828 3,594 Total Toyota Motor Corporation shareholders’ equity 10,359,723 10,332,371 124,262 Total property, plant and equipment, at cost 17,093,748 16,611,349 199,776 Noncontrolling interest 570,720 587,653 7,067 Less – Accumulated depreciation (10,382,847) (10,302,189) (123,899) Total shareholders’ equity 10,930,443 10,920,024 131,329 Total property, plant and equipment, net 6,710,901 6,309,160 75,877 Commitments and contingencies Total assets ¥ 30,349,287 ¥ 29,818,166 $ 358,607 Total liabilities and shareholders’ equity ¥30,349,287 ¥29,818,166 $358,607

The accompanying notes are an integral part of these consolidated financial statements.

TOYOTA ANNUAL REPORT 2011 70 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Statements of Income

Toyota Motor Corporation For the years ended March 31, 2009, 2010 and 2011

Yen in millions U.S. dollars in millions 2009 2010 2011 2011 Net revenues Sales of products ¥19,173,720 ¥17,724,729 ¥17,820,520 $214,318 Financing operations 1,355,850 1,226,244 1,173,168 14,109 20,529,570 18,950,973 18,993,688 228,427 Costs and expenses Cost of products sold 17,468,416 15,971,496 15,985,783 192,252 Cost of financing operations 987,384 712,301 629,543 7,571 Selling, general and administrative 2,534,781 2,119,660 1,910,083 22,972 20,990,581 18,803,457 18,525,409 222,795

Operating income (loss) (461,011) 147,516 468,279 5,632

Other income (expense) Interest and dividend income 138,467 78,224 90,771 1,092 Interest expense (46,882) (33,409) (29,318) (353) Foreign exchange gain (loss), net (1,815) 68,251 14,305 172 Other income (loss), net (189,140) 30,886 19,253 231 (99,370) 143,952 95,011 1,142

Income (loss) before income taxes and equity in earnings of affiliated companies (560,381) 291,468 563,290 6,774 Provision for income taxes (56,442) 92,664 312,821 3,762

Equity in earnings of affiliated companies 42,724 45,408 215,016 2,586 Net income (loss) (461,215) 244,212 465,485 5,598

Less: Net (income) loss attributable to the noncontrolling interests 24,278 (34,756) (57,302) (689)

Net income (loss) attributable to Toyota Motor Corporation ¥ (436,937) ¥ 209,456 ¥ 408,183 $ 4,909

Yen U.S. dollars Net income (loss) attributable to Toyota Motor Corporation per share — Basic ¥ (139.13) ¥ 66.79 ¥ 130.17 $ 1.57 — Diluted ¥ (139.13) ¥ 66.79 ¥ 130.16 $ 1.57

Cash dividends per share ¥ 100.00 ¥ 45.00 ¥ 50.00 $ 0.60

The accompanying notes are an integral part of these consolidated financial statements.

TOYOTA ANNUAL REPORT 2011 71 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Statements of Shareholders’ Equity

Toyota Motor Corporation For the years ended March 31, 2009, 2010 and 2011

Yen in millions Accumulated other Total Toyota Common Additional paid-in Retained comprehensive Treasury stock, Motor Corporation Noncontrolling Total shareholders’ stock capital earnings income (loss) at cost shareholders’ equity interest equity Balances at March 31, 2008 ¥397,050 ¥497,569 ¥12,408,550 ¥ (241,205) ¥(1,192,437) ¥11,869,527 ¥656,667 ¥12,526,194 Equity transaction with noncontrolling interests and other (30,645) (30,645) Issuance during the year 3,642 3,642 3,642 Comprehensive loss Net loss (436,937) (436,937) (24,278) (461,215) Other comprehensive income (loss) Foreign currency translation adjustments (381,303) (381,303) (18,865) (400,168) Unrealized losses on securities, net of reclassification adjustments (293,101) (293,101) (13,590) (306,691) Pension liability adjustments (192,172) (192,172) (8,874) (201,046) Total comprehensive loss (1,303,513) (65,607) (1,369,120) Dividends paid to Toyota Motor Corporation shareholders (439,991) (439,991) (439,991) Dividends paid to noncontrolling interests (20,885) (20,885) Purchase and reissuance of common stock (68,458) (68,458) (68,458) Balances at March 31, 2009 397,050 501,211 11,531,622 (1,107,781) (1,260,895) 10,061,207 539,530 10,600,737 Equity transaction with noncontrolling interests and other (2,116) (2,116) (2,748) (4,864) Issuance during the year 2,236 2,236 2,236 Comprehensive income Net income 209,456 209,456 34,756 244,212 Other comprehensive income Foreign currency translation adjustments 9,894 9,894 5,721 15,615 Unrealized gains on securities, net of reclassification adjustments 176,407 176,407 4,095 180,502 Pension liability adjustments 74,645 74,645 98 74,743 Total comprehensive income 470,402 44,670 515,072 Dividends paid to Toyota Motor Corporation shareholders (172,476) (172,476) (172,476) Dividends paid to noncontrolling interests (10,732) (10,732) Purchase and reissuance of common stock 470 470 470 Balances at March 31, 2010 397,050 501,331 11,568,602 (846,835) (1,260,425) 10,359,723 570,720 10,930,443 Equity transaction with noncontrolling interests and other 2,310 2,310 5,183 7,493 Issuance during the year 2,119 2,119 2,119 Comprehensive income Net income 408,183 408,183 57,302 465,485 Other comprehensive income (loss) Foreign currency translation adjustments (287,613) (287,613) (11,965) (299,578) Unrealized losses on securities, net of reclassification adjustments (26,058) (26,058) (1,599) (27,657) Pension liability adjustments 15,785 15,785 (4,331) 11,454 Total comprehensive income 110,297 39,407 149,704 Dividends paid to Toyota Motor Corporation shareholders (141,120) (141,120) (141,120) Dividends paid to noncontrolling interests (27,657) (27,657) Purchase and reissuance of common stock (958) (958) (958) Balances at March 31, 2011 ¥397,050 ¥505,760 ¥11,835,665 ¥(1,144,721) ¥(1,261,383) ¥10,332,371 ¥587,653 ¥10,920,024

The accompanying notes are an integral part of these consolidated financial statements.

TOYOTA ANNUAL REPORT 2011 72 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Statements of Shareholders’ Equity

Toyota Motor Corporation For the years ended March 31, 2009, 2010 and 2011

U.S. dollars in millions Accumulated other Total Toyota Common Additional paid-in Retained comprehensive Treasury stock, Motor Corporation Noncontrolling Total shareholders’ stock capital earnings income (loss) at cost shareholders’ equity interest equity Balances at March 31, 2010 $4,775 $6,029 $139,129 $(10,184) $(15,158) $124,591 $6,864 $131,455 Equity transaction with noncontrolling interests and other 28 28 62 90 Issuance during the year 26 26 26 Comprehensive income Net income 4,909 4,909 689 5,598 Other comprehensive income (loss) Foreign currency translation adjustments (3,459) (3,459) (144) (3,603) Unrealized losses on securities, net of reclassification adjustments (314) (314) (19) (333) Pension liability adjustments 190 190 (52) 138 Total comprehensive income 1,326 474 1,800 Dividends paid to Toyota Motor Corporation shareholders (1,697) (1,697) (1,697) Dividends paid to noncontrolling interests (333) (333) Purchase and reissuance of common stock (12) (12) (12) Balances at March 31, 2011 $4,775 $6,083 $142,341 $(13,767) $(15,170) $124,262 $7,067 $131,329

The accompanying notes are an integral part of these consolidated financial statements.

TOYOTA ANNUAL REPORT 2011 73 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Consolidated Statements of Cash Flows

Toyota Motor Corporation For the years ended March 31, 2009, 2010 and 2011

Yen in millions U.S. dollars in millions Yen in millions U.S. dollars in millions 2009 2010 2011 2011 2009 2010 2011 2011 Cash flows from operating activities Cash flows from investing activities Net income (loss) ¥ (461,215) ¥ 244,212 ¥ 465,485 $ 5,598 Additions to finance receivables ¥(8,612,111) ¥(7,806,201) ¥(8,438,785) $(101,488) Adjustments to reconcile net income (loss) to Collection of finance receivables 8,143,804 7,509,578 7,934,364 95,422 net cash provided by operating activities Proceeds from sales of finance receivables 11,290 8,390 69,576 837 Depreciation 1,495,170 1,414,569 1,175,573 14,138 Additions to fixed assets excluding Provision for doubtful accounts and credit losses 257,433 100,775 4,140 50 equipment leased to others (1,364,582) (604,536) (629,326) (7,569) Pension and severance costs, Additions to equipment leased to others (960,315) (833,065) (1,061,865) (12,770) less payments (20,958) 1,254 (23,414) (282) Proceeds from sales of fixed assets Losses on disposal of fixed assets 68,682 46,937 36,214 436 excluding equipment leased to others 47,386 52,473 51,342 618 Unrealized losses on available-for-sale Proceeds from sales of equipment leased to securities, net 220,920 2,486 7,915 95 others 528,749 465,092 486,695 5,853 Deferred income taxes (194,990) 25,537 85,710 1,031 Purchases of marketable securities and security investments (636,030) (2,412,182) (4,421,807) (53,179) Equity in earnings of affiliated companies (42,724) (45,408) (215,016) (2,586) Proceeds from sales of marketable securities Changes in operating assets and and security investments 800,422 77,025 189,037 2,273 liabilities, and other Proceeds upon maturity of marketable (Increase) decrease in accounts and 791,481 (576,711) 421,423 5,068 securities and security investments 675,455 1,031,716 3,527,119 42,419 notes receivable Payment for additional investments in Decrease in inventories 192,379 56,059 51,808 623 affiliated companies, net of cash acquired (45) (1,020) (299) (4) Decrease in other current assets 9,923 97,494 38,307 461 Changes in investments and other assets, Increase (decrease) in accounts payable (837,402) 649,214 (406,210) (4,885) and other 135,757 (337,454) 177,605 2,136 Increase (decrease) in accrued Net cash used in investing activities ¥(1,230,220) ¥(2,850,184) ¥(2,116,344) $ (25,452) income taxes (251,868) 102,207 (40,629) (489) Increase (decrease) in other Cash flows from financing activities current liabilities (41,819) 213,341 239,319 2,878 Proceeds from issuance of long-term debt ¥ 3,506,990 ¥ 3,178,310 ¥ 2,931,436 $ 35,255 Other 291,893 226,564 183,384 2,206 Payments of long-term debt (2,704,078) (2,938,202) (2,489,632) (29,942) Net cash provided by operating activities ¥1,476,905 ¥2,558,530 ¥2,024,009 $24,342 Increase (decrease) in short-term borrowings 406,507 (335,363) 162,260 1,951 Dividends paid (439,991) (172,476) (141,120) (1,697) Purchase of common stock, and other (70,587) (10,251) (28,617) (344) Net cash provided by (used in) financing activities 698,841 (277,982) 434,327 5,223 Effect of exchange rate changes on cash and cash equivalents (129,793) (8,898) (127,029) (1,528) Net increase (decrease) in cash and cash equivalents 815,733 (578,534) 214,963 2,585 Cash and cash equivalents at beginning of year 1,628,547 2,444,280 1,865,746 22,439 Cash and cash equivalents at end of year ¥ 2,444,280 ¥ 1,865,746 ¥ 2,080,709 $ 25,024

The accompanying notes are an integral part of these consolidated financial statements.

TOYOTA ANNUAL REPORT 2011 74 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

1 Nature of operations: Japanese yen at appropriate year-end current are recognized on a straight-line basis over the exchange rates and all income and expense lease term. Toyota is primarily engaged in the design, vehicle and equipment leasing and certain other accounts of those subsidiaries are translated at The sale of certain vehicles includes a manufacture, and sale of sedans, minivans, financial services primarily to its dealers and their the average exchange rates for each period. The determinable amount for the contract, which compact cars, sport-utility vehicles, trucks and customers to support the sales of vehicles and foreign currency translation adjustments are entitles customers to free vehicle maintenance. related parts and accessories throughout the other products manufactured by Toyota. included as a component of accumulated other Such revenues from free maintenance contracts world. In addition, Toyota provides financing, comprehensive income. are deferred and recognized as revenue over the Foreign currency receivables and payables period of the contract, which approximates the are translated at appropriate year-end current pattern of the related costs. exchange rates and the resulting transaction 2 Summary of significant accounting policies: gains or losses are recorded in operations Other costs currently. Advertising and sales promotion costs are The parent company and its subsidiaries in Japan non-public companies in which Toyota does not expensed as incurred. Advertising costs were and its foreign subsidiaries maintain their records exercise significant influence (generally less than Revenue recognition ¥389,242 million, ¥304,375 million and ¥308,903 and prepare their financial statements in a 20% ownership interest) are stated at cost. The Revenues from sales of vehicles and parts are million ($3,715 million) for the years ended March accordance with accounting principles generally accounts of variable interest entities as defined generally recognized upon delivery which is 31, 2009, 2010 and 2011, respectively. accepted in Japan and those of their countries of by U.S.GAAP are included in the consolidated considered to have occurred when the dealer has Toyota generally warrants its products against domicile. Certain adjustments and reclassifica- financial statements, if applicable. taken title to the product and the risk and reward certain manufacturing and other defects. tions have been incorporated in the accompanying of ownership have been substantively transferred, Provisions for product warranties are provided for consolidated financial statements to conform to Estimates except as described below. specific periods of time and/or usage of the U.S.GAAP. The preparation of Toyota’s consolidated financial Toyota’s sales incentive programs principally product and vary depending upon the nature of Significant accounting policies after reflecting statements in conformity with U.S.GAAP requires consist of cash payments to dealers calculated the product, the geographic location of the sale adjustments for the above are as follows: management to make estimates and assumptions based on vehicle volume or a model sold by a and other factors. Toyota records a provision for that affect the amounts reported in the consoli- dealer during a certain period of time. Toyota estimated product warranty costs at the time the Basis of consolidation and accounting for dated financial statements and accompanying accrues these incentives as revenue reductions related sale is recognized based on estimates investments in affiliated companies notes. Actual results could differ from those upon the sale of a vehicle corresponding to the that Toyota will incur to repair or replace product The consolidated financial statements include the estimates. The more significant estimates include: program by the amount determined in the related parts that fail while under warranty. The amount of accounts of the parent company and those of its product warranties, liabilities accrued for recalls incentive program. accrued estimated warranty costs is primarily majority-owned subsidiary companies. All signifi- and other safety measures, allowance for doubtful Revenues from the sales of vehicles under based on historical experience as to product cant intercompany transactions and accounts accounts and credit losses, residual values for which Toyota conditionally guarantees the failures as well as current information on repair have been eliminated. Investments in affiliated leased assets, impairment of long-lived assets, minimum resale value are recognized on a pro costs. The amount of warranty costs accrued also companies in which Toyota exercises significant pension costs and obligations, fair value of deriva- rata basis from the date of sale to the first exercise contains an estimate of warranty claim recoveries influence, but which it does not control, are stated tive financial instruments, other-than-temporary date of the guarantee in a manner similar to to be received from suppliers. at cost plus equity in undistributed earnings. losses on marketable securities, litigation liabili- operating lease accounting. The underlying In addition to product warranties above, Consolidated net income includes Toyota’s equity ties and valuation allowance for deferred tax vehicles of these transactions are recorded as Toyota accrues for costs of recalls and other in current earnings of such companies, after assets. assets and are depreciated in accordance with safety measures based on management’s elimination of unrealized intercompany profits. Toyota’s depreciation policy. estimates when it is probable a liability has been Investments in such companies are reduced to Translation of foreign currencies Revenues from retail financing contracts and incurred and the amount of loss can be reasonably net realizable value if a decline in market value is All asset and liability accounts of foreign finance leases are recognized using the effective estimated. Prior to the fourth quarter of fiscal determined other-than-temporary. Investments in subsidiaries and affiliates are translated into yield method. Revenues from operating leases 2010, amounts were accrued based on individual

TOYOTA ANNUAL REPORT 2011 75 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

occurrences of recalls and other safety measures. unrealized gains or losses included as a return over the term of the related contracts. first leased. Vehicles returned to Toyota at the end During the fourth quarter of fiscal 2010, as a result component of accumulated other comprehensive The determination of portfolio segments is of their leases are sold by auction. of significant changes in facts and circumstances, income in shareholders’ equity, net of applicable based primarily on the qualitative consideration of Toyota classifies finance lease receivables Toyota has employed an estimation model, to taxes. Individual securities classified as available- the nature of Toyota’s business operations and portfolio segment into one class based on accrue at the time of vehicle sale, an amount that for-sale are reduced to net realizable value for finance receivables. The three portfolio segments common risk characteristics associated with the represents management’s best estimate of other-than-temporary declines in market value. In within finance receivables are as follows: underlying finance receivables and the similarity expenses related to future recalls and other safety determining if a decline in value is other-than- of the credit risks. measures. The estimation model for recalls and temporary, Toyota considers the length of time Retail receivables portfolio segment other safety measures takes into account Toyota’s and the extent to which the fair value has been The retail receivables portfolio segment consists Wholesale and other dealer loan receivables historical experience and individual occurrences less than the carrying value, the financial condition of retail installment sales contracts acquired portfolio segment of recalls and other safety measures. This change and prospects of the company and Toyota’s mainly from dealers (“auto loans”) including credit Toyota provides wholesale financing to qualified resulted from Toyota’s fiscal 2010 experience with ability and intent to retain its investment in the card loans. These contracts acquired must first dealers to finance inventories. Toyota acquires recalls and other safety measures changes in the company for a period of time sufficient to allow for meet specified credit standards. Thereafter, security interests in vehicles financed at operating processes such as the establishment any anticipated recovery in market value. Realized Toyota retains responsibility for contract collection wholesale. In cases where additional security of the Special Committee for Global Quality to gains and losses, which are determined on the and administration. interests would be required, Toyota takes address quality-related matters, as well as the average-cost method, are reflected in the Contract period of auto loans primarily range dealership assets or personal assets, or both, as broadening of the number of vehicles subject to statement of income when realized. from 2 to 7 years. Toyota acquires security interests additional security. If a dealer defaults, Toyota recalls and other safety measures. in the vehicles financed and has the right to has the right to liquidate any assets acquired and Litigation liabilities are established to cover Security investments in non-public companies repossess vehicles if customers fail to meet their seek legal remedies. probable losses on various lawsuits based on the Security investments in non-public companies contractual obligations. Almost all auto loans are Toyota also makes term loans to dealers for information currently available. Attorneys’ fees are are carried at cost as fair value is not readily non-recourse, which relieves the dealers from business acquisitions, facilities refurbishment, expensed as incurred. determinable. If the value of a non-public security financial responsibility in the event of repossession. real estate purchases and working capital Research and development costs are investment is estimated to have declined and Toyota classifies retail receivables portfolio requirements. These loans are typically secured expensed as incurred. Research and development such decline is judged to be other-than-temporary, segment into one class based on common risk with liens on real estate, other dealership assets costs were ¥904,075 million, ¥725,345 million and Toyota recognizes the impairment of the characteristics associated with the underlying and/or personal assets of the dealers. ¥730,340 million ($8,783 million) for the years investment and the carrying value is reduced to finance receivables, the similarity of the credit Toyota classifies wholesale and other dealer ended March 31, 2009, 2010 and 2011, respectively. its fair value. Determination of impairment is risks, and the quantitative materiality. loan receivables portfolio segment into three based on the consideration of such factors as classes of wholesale, real estate and working Cash and cash equivalents operating results, business plans and estimated Finance lease receivables portfolio segment capital, based on the risk characteristics associated Cash and cash equivalents include all highly future cash flows. Fair value is determined Toyota acquires new vehicle lease contracts with the underlying finance receivables. liquid investments with original maturities of three principally through the use of the latest financial originated primarily through dealers. Contract Impaired finance receivables primarily consist months or less, that are readily convertible to information. period of these primarily range from 2 to 5 years. of wholesale and other dealer loan receivables. known amounts of cash and are so near maturity Lease contracts acquired must first meet specified For all classes of finance receivables within that they present insignificant risk of changes in Finance receivables credit standards after which Toyota assumes the wholesale and other dealer loan receivables value because of changes in interest rates. Finance receivables are recorded at the present ownership of the leased vehicle. Toyota is portfolio segment, a receivable account balance value of the related future cash flows including responsible for contract collection and is considered impaired when it is probable that Marketable securities residual values for finance leases. Incremental administration during the lease period. Toyota will be unable to collect all amounts due Marketable securities consist of debt and equity direct costs incurred in connection with the Toyota is generally permitted to take possession (including principal and interest) based on current securities. Debt and equity securities designated acquisition of finance receivables are capitalized of the vehicle upon a default by the lessee. The information and events according to the terms of as available-for-sale are carried at fair value with and amortized so as to approximate a level rate of residual value is estimated at the time the vehicle is the contract. Factors such as payment history,

TOYOTA ANNUAL REPORT 2011 76 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

compliance with terms and conditions of the As of March 31, 2011, finance receivables on events and conditions, the estimated fair value that such receivables will be unable to be fully underlying loan agreement and other subjective nonaccrual status were as follows: and adequacy of collateral and other pertinent collected. The fair value of the underlying collateral factors related to the financial stability of the factors. Vehicles and equipment on operating is used if the receivable is collateral-dependent. Yen in millions U.S. dollars in millions borrower are considered when determining leases are not within the scope of accounting The receivable is determined collateral-dependent March 31, March 31, whether a loan is impaired. Impaired finance guidance governing the disclosure of portfolio if the repayment of the loan is expected to be 2011 2011 receivables include certain nonaccrual receivables segments. provided by the underlying collateral. For the Retail ¥ 2,633 $ 32 for which a specific reserve has been assessed. receivables in which the fair value of the underlying Finance leases 1,136 14 Impaired receivables are excluded from the loan Retail receivables portfolio segment collateral was in excess of the outstanding Wholesale 6,722 81 risk pool used to determine general reserves. Toyota calculates allowance for credit losses to balance, no allowance was provided. Real estate 14,437 173 All classes of wholesale and other dealer loan cover probable losses on retail receivables by Specific reserves on impaired receivables Working capital 272 3 receivables portfolio segment are placed on ¥25,200 $303 applying reserve rates to such receivables. within the wholesale and other dealer loan nonaccrual status when full payment of principal Reserve rates are calculated mainly by historical receivables portfolio segment are recorded by an or interest is in doubt, principal or interest is 90 loss experience, current economic events and increase to the allowance for credit losses based days or more contractually past due, whichever As of March 31, 2010, finance receivables conditions and other pertinent factors. on the related measurement of impairment. occurs first. Collateral dependent loans are past due over 90 days and still accruing were Related collateral, if recoverable, is repossessed placed on nonaccrual status if collateral is ¥38,150 million. Finance lease receivables portfolio segment and sold and the account balance is written-off. insufficient to cover principal and interest. Interest As of March 31, 2011, finance receivables Toyota calculates allowance for credit losses to Any shortfall between proceeds received and accrued but not collected at the date a receivable past due over 90 days and still accruing were as cover probable losses on finance lease receivables the carrying cost of repossessed collateral is is placed on nonaccrual status is reversed against follows: by applying reserve rates to such receivables. charged to the allowance. Recoveries are reversed interest income. In addition, the amortization of Reserve rates are calculated mainly by historical from the allowance for credit losses. Yen in millions U.S. dollars in millions net deferred fees is suspended. loss experience, current economic events and March 31, March 31, Interest income on nonaccrual receivables is conditions and other pertinent factors such as Allowance for residual value losses 2011 2011 recognized only to the extent it is received in cash. used car markets. Toyota is exposed to risk of loss on the disposition Retail ¥23,734 $285 Accounts are restored to accrual status only when of off-lease vehicles to the extent that sales Finance leases 4,484 54 interest and principal payments are brought Wholesale and other dealer loan receivables proceeds are not sufficient to cover the carrying ¥28,218 $339 current and future payments are reasonably portfolio segment value of the leased asset at lease termination. assured. Receivable balances are written-off Toyota calculates allowance for credit losses to Toyota maintains an allowance to cover probable against the allowance for credit losses when it is Allowance for credit losses cover probable losses on wholesale and other estimated losses related to unguaranteed residual probable that a loss has been realized. Retail Allowance for credit losses is established to cover dealer loan receivables by applying reserve rates values on its owned portfolio. The allowance is receivables class and finance lease receivables probable losses on finance receivables and to such receivables. Reserve rates are calculated evaluated considering projected vehicle return class are not placed mainly on nonaccrual status vehicles and equipment on operating leases, mainly by financial conditions of the dealers, terms rates and projected loss severity. Factors when principal or interest is 90 days or more past resulting from the inability of customers to make of collateral setting, current economic events and considered in the determination of projected return due. However, these receivables are written-off required payments. conditions and other pertinent factors. rates and loss severity include historical and against the allowance for credit losses when Provision for credit losses is included in selling, Toyota establishes specific reserves to cover market information on used vehicle sales, trends payments due are no longer expected to be general and administrative expenses. The the estimated losses on individually impaired in lease returns and new car markets, and general received or the account is 120 days contractually allowance for credit losses is based on a receivables within the wholesale and other dealer economic conditions. Management evaluates the past due, whichever occurs first. systematic, ongoing review and evaluation loan receivables portfolio segment. Specific foregoing factors, develops several potential loss As of March 31, 2010, finance receivables on performed as part of the credit-risk evaluation reserves on impaired receivables are determined scenarios, and reviews allowance levels to nonaccrual status were ¥26,599 million. process, historical loss experience, the size and by the present value of expected future cash flows determine whether reserves are considered composition of the portfolios, current economic or the fair value of collateral when it is probable adequate to cover the probable range of losses.

TOYOTA ANNUAL REPORT 2011 77 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

The allowance for residual value losses is Vehicles and equipment on operating leases An impairment loss would be recognized Income taxes maintained in amounts considered by Toyota to to third parties are originated by dealers and when the carrying amount of an asset exceeds The provision for income taxes is computed based be appropriate in relation to the estimated losses acquired by certain consolidated subsidiaries. the estimated undiscounted cash flows used in on the pretax income included in the consolidated on its owned portfolio. Upon disposal of the Such subsidiaries are also the lessors of certain determining the fair value of the asset. The amount statement of income. The asset and liability assets, the allowance for residual losses is property that they acquire directly. Vehicles and of the impairment loss to be recorded is generally approach is used to recognize deferred tax assets adjusted for the difference between the net book equipment on operating leases are depreciated determined by the difference between the fair and liabilities for the expected future tax value and the proceeds from sale. primarily on a straight-line method over the lease value of the asset using a discounted cash flow consequences of temporary differences between term, generally from 2 to 5 years, to the estimated valuation method and the current book value. the carrying amounts and the tax bases of assets Inventories residual value. Incremental direct costs incurred and liabilities. Valuation allowances are recorded Inventories are valued at cost, not in excess of in connection with the acquisition of operating Employee benefit obligations to reduce deferred tax assets when it is more likely market, cost being determined on the “average- lease contracts are capitalized and amortized on Toyota has both defined benefit and defined than not that a tax benefit will not be realized. cost” basis, except for the cost of finished products a straight-line method over the lease term. contribution plans for employees’ retirement carried by certain subsidiary companies which is benefits. Retirement benefit obligations are Derivative financial instruments determined on the “specific identification” basis Long-lived assets measured by actuarial calculations in accordance Toyota employs derivative financial instruments, or “last-in, first-out” (“LIFO”) basis. Inventories Toyota reviews its long-lived assets for impairment with U.S.GAAP. The funded status of the defined including forward foreign currency exchange valued on the LIFO basis totaled ¥199,275 million whenever events or changes in circumstances benefit postretirement plans is recognized on the contracts, foreign currency options, interest rate and ¥151,183 million ($1,818 million) at March 31, indicate that the carrying amount of an asset consolidated balance sheets as prepaid pension swaps, interest rate currency swap agreements 2010 and 2011, respectively. Had the “first-in, group may not be recoverable. An impairment and severance costs or accrued pension and and interest rate options to manage its exposure first-out” basis been used for those companies loss would be recognized when the carrying severance costs, and the funded status change to fluctuations in interest rates and foreign using the LIFO basis, inventories would have been amount of an asset group exceeds the estimated is recognized in the year in which it occurs through currency exchange rates. Toyota does not use ¥64,099 million and ¥57,943 million ($697 million) undiscounted cash flows expected to result from other comprehensive income. derivatives for speculation or trading purposes. higher than reported at March 31, 2010 and 2011, the use of the asset and its eventual disposition. Changes in the fair value of derivatives are respectively. The amount of the impairment loss to be recorded Environmental matters recorded each period in current earnings or is calculated by the excess of the carrying value Environmental expenditures relating to current through other comprehensive income, depending Property, plant and equipment of the asset group over its fair value. Fair value is operations are expensed or capitalized as on whether a derivative is designated as part of a Property, plant and equipment are stated at cost. determined mainly using a discounted cash flow appropriate. Expenditures relating to existing hedge transaction and the type of hedge Major renewals and improvements are capitalized; valuation method. conditions caused by past operations, which do transaction. The ineffective portion of all hedges minor replacements, maintenance and repairs not contribute to current or future revenues, are is recognized currently in operations. are charged to current operations. Depreciation Goodwill and intangible assets expensed. Liabilities for remediation costs are of property, plant and equipment is mainly Goodwill is not material to Toyota’s consolidated recorded when they are probable and reasonably Net income attributable to Toyota Motor computed on the declining-balance method for balance sheets. estimable, generally no later than the completion Corporation per share the parent company and Japanese subsidiaries Intangible assets consist mainly of software. of feasibility studies or Toyota’s commitment to a Basic net income attributable to Toyota Motor and on the straight-line method for foreign Intangible assets with a definite life are amortized plan of action. The cost of each environmental Corporation per common share is calculated by subsidiary companies at rates based on estimated on a straight-line basis with estimated useful lives liability is estimated by using current technology dividing net income attributable to Toyota Motor useful lives of the respective assets according to mainly of 5 years. Intangible assets with an available and various engineering, financial and Corporation by the weighted-average number of general class, type of construction and use. The indefinite life are tested for impairment whenever legal specialists within Toyota based on current shares outstanding during the reported period. estimated useful lives range from 2 to 65 years for events or circumstances indicate that a carrying law. Such liabilities do not reflect any offset for The calculation of diluted net income attributable buildings and from 2 to 20 years for machinery amount of an asset (asset group) may not be possible recoveries from insurance companies to Toyota Motor Corporation per common share is and equipment. recoverable. and are not discounted. There were no material similar to the calculation of basic net income changes in these liabilities for all periods presented. attributable to Toyota Motor Corporation per

TOYOTA ANNUAL REPORT 2011 78 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

share, except that the weighted-average number when a variable interest entity should be is effective for the interim period or the fiscal year Reclassifications of shares outstanding includes the additional consolidated. Toyota adopted this guidance from beginning on or after June 15, 2011, and shall be Certain prior year amounts have been reclassified dilution from the assumed exercise of dilutive the fiscal year ended March 31, 2011. The adoption applied retrospectively to the beginning of the to conform to the presentations as of and for the stock options. of this guidance did not have a material impact on fiscal year of adoption. Management does not year ended March 31, 2011. Toyota’s consolidated financial statements. expect this guidance to have a material impact on Stock-based compensation In July 2010, FASB issued updated disclosure Toyota’s consolidated financial statements. Toyota measures compensation expense for its guidance on receivables. This guidance requires stock-based compensation plan based on the additional disclosures about the credit quality of grant-date fair value of the award, and accounts financing receivables and the allowance for credit for the award. losses. Toyota adopted this guidance from the 3 U.S. dollar amounts: fiscal year ended March 31, 2011. The adoption of Other comprehensive income this guidance did not have a material impact on U.S. dollar amounts presented in the consolidated could be converted into, U.S. dollars. For this Other comprehensive income refers to revenues, Toyota’s consolidated financial statements. For a financial statements and related notes are purpose, the rate of ¥83.15 = U.S. $1, the approxi- expenses, gains and losses that, under U.S.GAAP further discussion of additional disclosures by included solely for the convenience of the reader mate current exchange rate at March 31, 2011, are included in comprehensive income, but are adoption of this guidance, please see notes 7 and and are unaudited. These translations should not was used for the translation of the accompanying excluded from net income as these amounts are 11 to Toyota’s consolidated financial statements. be construed as representations that the yen consolidated financial amounts of Toyota as of recorded directly as an adjustment to shareholders’ amounts actually represent, or have been or and for the year ended March 31, 2011. equity. Toyota’s other comprehensive income is Recent pronouncements to be adopted in primarily comprised of unrealized gains/losses on future periods marketable securities designated as available- In October 2009, FASB issued updated guidance for-sale, foreign currency translation adjustments of accounting for and disclosure of Revenue 4 Supplemental cash flow information: and adjustments attributed to pension liabilities or Recognition with Multiple Deliverables. This minimum pension liabilities associated with guidance allows the use of estimated selling price Cash payments for income taxes were ¥563,368 ¥445,049 million and ¥382,903 million ($4,605 Toyota’s defined benefit pension plans. for determining the selling price of deliverables, million, ¥(207,278) million and ¥211,487 million million), respectively. eliminates the residual method of allocation and ($2,543 million) for the years ended March 31, Capital lease obligations of ¥28,953 million, Accounting changes expands the disclosures related to a vendor’s 2009, 2010 and 2011, respectively. Interest ¥3,400 million and ¥10,478 million ($126 million) In June 2009, FASB issued updated guidance of multiple-deliverable revenue arrangements. This payments during the years ended March 31, were incurred for the years ended March 31, accounting for and disclosure of transfers and guidance is effective prospectively for revenue 2009, 2010 and 2011 were ¥614,017 million, 2009, 2010 and 2011, respectively. servicing. This guidance eliminates the concept arrangements entered into or materially modified of a qualifying special-purpose entity, changes in fiscal year beginning on or after June 15, 2010. the requirements for derecognizing financial Management does not expect this guidance to assets, and requires additional disclosures about have a material impact on Toyota’s consolidated 5 Acquisitions and dispositions: transfers of financial assets. Toyota adopted this financial statements. guidance from the fiscal year ended March 31, In April 2011, FASB issued updated guidance During the years ended March 31, 2009, 2010 and 2011, Toyota made several acquisitions and disposi- 2011. The adoption of this guidance did not have to clarify the accounting for and disclosures about tions, however the assets and liabilities acquired or transferred were not material. a material impact on Toyota’s consolidated troubled debt restructurings by creditors. This financial statements. guidance provides the criteria as to whether a In June 2009, FASB issued updated guidance loan modification constitutes a troubled debt of accounting for and disclosure of consolidation. restructuring and requires additional disclosures This guidance changes how a company determines about troubled debt restructurings. This guidance

TOYOTA ANNUAL REPORT 2011 79 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

6 Marketable securities and other securities investments: Government bonds include 76% of Japanese million), respectively, which are included in “Other government bonds, and 24% of U.S. and European income (loss), net” in the accompanying Marketable securities and other securities investments include government bonds and common stocks government bonds as of March 31, 2010, and consolidated statements of income. Impairment for which the aggregate cost, gross unrealized gains and losses and fair value are as follows: 77% of Japanese government bonds, and 23% of losses recognized during the year ended March U.S. and European government bonds as of 31, 2009 primarily include a loss for an other-than- Yen in millions March 31, 2011. Listed stocks on the Japanese temporary impairment on a certain investment for March 31, 2010 Gross unrealized Gross unrealized stock markets represent 88% and 86% of common which Toyota previously recorded an exchange Cost gains losses Fair value stocks which are included in available-for-sale as gain. Available-for-sale of March 31, 2010 and 2011, respectively. “Other” In the ordinary course of business, Toyota Government bonds ¥2,695,248 ¥ 24,228 ¥ 64,647 ¥2,654,829 includes primarily commercial paper. maintains long-term investment securities, Common stocks 555,526 369,670 72,421 852,775 Unrealized losses continuing over a 12 month included in “Marketable securities and other Other 403,776 17,588 1 421,363 Total ¥3,654,550 ¥411,486 ¥137,069 ¥3,928,967 period or more in the aggregate were not material securities investments” and issued by a number Securities not practicable to determine fair value at March 31, 2010 and 2011. of non-public companies which are recorded at Common stocks ¥ 95,304 As of March 31, 2010 and 2011, maturities of cost, as their fair values were not readily Other 25,173 government bonds and other included in determinable. Management employs a systematic Total ¥ 120,477 available-for-sale are mainly from 1 to 10 years. methodology to assess the recoverability of such Proceeds from sales of available-for-sale investments by reviewing the financial viability of Yen in millions securities were ¥800,422 million, ¥77,025 million the underlying companies and the prevailing March 31, 2011 and ¥189,037 million ($2,273 million) for the years market conditions in which these companies Gross unrealized Gross unrealized Cost gains losses Fair value ended March 31, 2009, 2010 and 2011, operate to determine if Toyota’s investment in Available-for-sale respectively. On those sales, gross realized gains each individual company is impaired and whether Government bonds ¥3,174,236 ¥ 21,712 ¥ 68,778 ¥3,127,170 were ¥35,694 million, ¥3,186 million and ¥8,974 the impairment is other-than-temporary. Toyota Common stocks 670,405 398,140 108,316 960,229 million ($108 million) and gross realized losses periodically performs this impairment test for Other 561,387 15,940 376 576,951 were ¥1,856 million, ¥7 million and ¥87 million ($1 significant investments recorded at cost. If the Total ¥4,406,028 ¥435,792 ¥177,470 ¥4,664,350 million), respectively. impairment is determined to be other-than- Securities not practicable to determine fair value During the years ended March 31, 2009, temporary, the carrying value of the investment is Common stocks ¥ 109,203 Other 23,069 2010 and 2011, Toyota recognized impairment written-down by the impaired amount and the Total ¥ 132,272 losses on available-for-sale securities of ¥220,920 losses are recognized currently in operations. million, ¥2,486 million and ¥7,915 million ($95 U.S. dollars in millions March 31, 2011 Gross unrealized Gross unrealized Cost gains losses Fair value Available-for-sale Government bonds $38,175 $ 261 $ 827 $37,609 Common stocks 8,063 4,788 1,303 11,548 Other 6,751 192 4 6,939 Total $52,989 $5,241 $2,134 $56,096 Securities not practicable to determine fair value Common stocks $ 1,313 Other 278 Total $ 1,591

TOYOTA ANNUAL REPORT 2011 80 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

7 Finance receivables: Finance leases consist of the following:

Yen in millions U.S. dollars in millions Finance receivables consist of the following: March 31, March 31, Yen in millions U.S. dollars in millions 2010 2011 2011 March 31, March 31, Minimum lease payments ¥ 903,201 ¥ 804,871 $ 9,680 2010 2011 2011 Estimated unguaranteed residual values 329,307 318,317 3,828 Retail ¥ 7,162,082 ¥ 7,128,453 $ 85,730 1,232,508 1,123,188 13,508 Finance leases 1,232,508 1,123,188 13,508 Deferred origination costs 6,423 5,406 65 Wholesale and other dealer loans 2,051,301 1,990,557 23,939 Less - Unearned income (121,664) (104,419) (1,256) 10,445,891 10,242,198 123,177 Less - Allowance for credit losses (36,917) (36,024) (433) Deferred origination costs 109,747 104,391 1,256 Finance leases, net ¥1,080,350 ¥ 988,151 $11,884 Unearned income (482,983) (496,235) (5,968) Allowance for credit losses Toyota is exposed to credit risk on Toyota’s otherwise fail to perform as agreed. Toyota Retail (160,351) (92,199) (1,109) finance receivables. Credit risk is the risk of loss estimates allowance for credit losses by variety of Finance leases (36,917) (36,024) (433) arising from the failure of customers or dealers to credit-risk evaluation process to cover probable Wholesale and other dealer loans (35,211) (28,580) (344) meet the terms of their contracts with Toyota or and estimable losses above. Total allowance for credit losses (232,479) (156,803) (1,886) Total finance receivables, net 9,840,176 9,693,551 116,579 The table below shows the amount of the finance receivables segregated into aging categories Less - Current portion (4,209,496) (4,136,805) (49,751) based on the number of days outstanding as of March 31, 2011: Noncurrent finance receivables, net ¥ 5,630,680 ¥ 5,556,746 $ 66,828 Yen in millions March 31, 2011 Finance receivables were geographically America 59.0%, in Japan 12.7%, in Europe 10.4%, Retail Finance leases Wholesale Real estate Working capital distributed as follows: in North America 61.9%, in in Asia 5.8% and in Other 12.1% as of March 31, Current ¥7,017,171 ¥1,111,453 ¥897,971 ¥494,700 ¥593,516 Japan 12.8%, in Europe 10.3%, in Asia 4.7% and 2011. 31-60 days past due 72,082 5,968 2,260 404 44 in Other 10.3% as of March 31, 2010, and in North 61-90 days past due 15,466 1,283 355 34 0 Over 90 days past due 23,734 4,484 74 621 578 The contractual maturities of retail receivables, the future minimum lease payments on finance leases Total ¥7,128,453 ¥1,123,188 ¥900,660 ¥495,759 ¥594,138 and wholesale and other dealer loans at March 31, 2011 are summarized as follows:

U.S. dollars in millions Yen in millions U.S. dollars in millions March 31, 2011 Wholesale and Wholesale and Finance other dealer Finance other dealer Retail Finance leases Wholesale Real estate Working capital Years ending March 31, Retail leases loans Retail leases loans Current $84,392 $13,367 $10,799 $5,950 $7,138 2012 ¥2,429,001 ¥326,116 ¥1,529,447 $29,212 $3,922 $18,394 31-60 days past due 867 72 27 5 1 2013 1,758,024 216,387 106,809 21,143 2,602 1,284 61-90 days past due 186 15 4 0 0 2014 1,343,998 165,018 153,470 16,164 1,985 1,846 Over 90 days past due 285 54 1 7 7 2015 911,785 62,632 52,361 10,966 753 630 Total $85,730 $13,508 $10,831 $5,962 $7,146 2016 444,633 28,095 59,945 5,347 338 721 Thereafter 241,012 6,623 88,525 2,898 80 1,064 ¥7,128,453 ¥804,871 ¥1,990,557 $85,730 $9,680 $23,939

TOYOTA ANNUAL REPORT 2011 81 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

The tables below show the recorded investment for each credit quality of the finance receivable Other regions within the wholesale and other dealer loan receivables portfolio segment in the United States and other The wholesale and other dealer loan receivables portfolio segment in other regions is primarily segregated regions as of March 31, 2011: into credit qualities of “Performing” (Account not classified as Default) and “Default” (Account is not currently meeting contractual obligations or we have temporarily waived certain contractual requirements) United States below based on internal risk assessments by dealers. The wholesale and other dealer loan receivables portfolio segment in the United States is primarily Yen in millions segregated into credit qualities below based on internal risk assessments by dealers. March 31, 2011 Wholesale Real estate Working capital Total Performing: Account not classified as either Credit Watch, At Risk or Default Performing ¥315,744 ¥151,020 ¥485,974 ¥952,738 Credit Watch: Account designated for elevated attention Default 14,553 6,047 3,700 24,300 At Risk: Account where there is a probability that default exists based on qualitative and quantitative Total ¥330,297 ¥157,067 ¥489,674 ¥977,038 factors

Default: Account is not currently meeting contractual obligations or we have temporarily waived U.S. dollars in millions certain contractual requirements March 31, 2011 Wholesale Real estate Working capital Total Yen in millions Performing $3,797 $1,816 $5,845 $11,458 March 31, 2011 Default 175 73 44 292 Wholesale Real estate Working capital Total Total $3,972 $1,889 $5,889 $11,750 Performing ¥504,960 ¥283,450 ¥ 90,545 ¥ 878,955 Credit Watch 58,106 41,967 12,198 112,271 At Risk 6,494 12,344 1,066 19,904 The tables below summarize information about impaired finance receivables: Default 803 931 655 2,389 Yen in millions Total ¥570,363 ¥338,692 ¥104,464 ¥1,013,519 March 31, 2010 Wholesale and other U.S. dollars in millions dealer loans March 31, 2011 Impaired finance receivables with specific reserves ¥37,273 Wholesale Real estate Working capital Total Impaired finance receivables without specific reserves 1,582 Performing $6,073 $3,409 $1,089 $10,571 Total ¥38,855 Credit Watch 698 505 147 1,350 Allowance for credit losses recorded for impaired finance receivables ¥14,000 At Risk 78 148 13 239 Average impaired finance receivables 42,581 Default 10 11 8 29 Interest recognized on impaired finance receivables 464 Total $6,859 $4,073 $1,257 $12,189

TOYOTA ANNUAL REPORT 2011 82 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

Yen in millions 9 Inventories: March 31, 2011 Wholesale Real estate Working capital Total Inventories consist of the following: Impaired finance receivables with specific reserves ¥ 7,192 ¥18,173 ¥4,841 ¥30,206 Impaired finance receivables without specific reserves 12,745 — 272 13,017 Yen in millions U.S. dollars in millions Total ¥19,937 ¥18,173 ¥5,113 ¥43,223 March 31, March 31, Allowance for credit losses recorded for impaired 2010 2011 2011 finance receivables ¥ 896 ¥ 6,553 ¥3,436 ¥10,885 Finished goods ¥ 885,005 ¥ 715,272 $ 8,602 Average impaired finance receivables 16,231 19,545 4,979 40,755 Raw materials 265,493 299,755 3,605 Interest recognized on impaired finance receivables 171 514 86 771 Work in process 199,267 218,335 2,626 Supplies and other 72,608 70,880 852 Total ¥1,422,373 ¥1,304,242 $15,685 U.S. dollars in millions March 31, 2011 Wholesale Real estate Working capital Total Impaired finance receivables with specific reserves $ 86 $219 $58 $363 Impaired finance receivables without specific reserves 154 — 3 157 10 Vehicles and equipment on operating leases: Total $240 $219 $61 $520 Allowance for credit losses recorded for impaired finance receivables $ 11 $ 79 $41 $131 Vehicles and equipment on operating leases consist of the following: Average impaired finance receivables 195 235 60 490 Yen in millions U.S. dollars in millions Interest recognized on impaired finance receivables 2 6 1 9 March 31, March 31, 2010 2011 2011 The recorded investment in impaired finance receivables is equal to the unpaid principal balance. Vehicles ¥2,516,948 ¥2,404,032 $28,912 Equipment 96,300 87,914 1,057 2,613,248 2,491,946 29,969 Less - Accumulated depreciation (791,169) (662,255) (7,964) 8 Other receivables: Vehicles and equipment on operating leases, net ¥1,822,079 ¥1,829,691 $22,005

Other receivables relate to arrangements with certain component manufacturers whereby Toyota procures Rental income from vehicles and equipment on operating leases was ¥560,251 million, ¥496,729 million inventory for these component manufactures and is reimbursed for the related purchases. and ¥475,472 million ($5,718 million) for the years ended March 31, 2009, 2010 and 2011, respectively. Future minimum rentals from vehicles and equipment on operating leases are due in installments as follows:

Years ending March 31, Yen in millions U.S. dollars in millions 2012 ¥375,712 $4,518 2013 256,231 3,082 2014 110,583 1,330 2015 26,645 320 2016 6,547 79 Thereafter 5,487 66 Total minimum future rentals ¥781,205 $9,395

The future minimum rentals as shown above should not be considered indicative of future cash collections.

TOYOTA ANNUAL REPORT 2011 83 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

11 Allowance for doubtful accounts and credit losses: Yen in millions U.S. dollars in millions For the year ended March 31, 2011 For the year ended March 31, 2011 An analysis of activity within the allowance for doubtful accounts relating to trade accounts and notes Wholesale and Wholesale and Finance other dealer Finance other dealer receivable for the years ended March 31, 2009, 2010 and 2011 is as follows: Retail leases loans Retail leases loans Allowance for credit losses at Yen in millions U.S. dollars in millions beginning of year ¥160,350 ¥36,918 ¥35,211 $1,929 $444 $423 For the year ended Provision for credit losses For the years ended March 31, March 31, (2,660) 6,023 2,098 (32) 73 26 2009 2010 2011 2011 Charge-offs (68,122) (2,820) (5,885) (819) (34) (71) Recoveries 14,159 288 636 170 3 8 Allowance for doubtful accounts at beginning of year ¥52,063 ¥48,006 ¥46,706 $562 Provision for doubtful accounts, net of reversal (1,663) 1,905 1,806 22 Other (11,528) (4,385) (3,480) (139) (53) (42) Write-offs (1,695) (1,357) (2,690) (33) Allowance for credit losses at end of year ¥ 92,199 ¥36,024 ¥28,580 $1,109 $433 $344 Other (699) (1,848) (1,775) (21) Allowance for doubtful accounts at end of year ¥48,006 ¥46,706 ¥44,047 $530 The allowance for credit losses and the ($363 million), respectively, are individually The other amount includes the impact of A portion of the allowance for doubtful accounts impaired finance receivables of the wholesale evaluated and recorded, and others are collec- consolidation and deconsolidation of certain balance at March 31, 2010 and 2011 totaling and other dealer loan receivables which are tively evaluated. entities due to changes in ownership interest and ¥32,971 million and ¥32,191 million ($387 million), ¥10,885 million ($131 million) and ¥30,206 million currency translation adjustments for the years respectively, is attributed to certain non-current ended March 31, 2009, 2010 and 2011. receivable balances which are reported as other assets in the consolidated balance sheets. 12 Affiliated companies and variable interest entities:

An analysis of the allowance for credit losses relating to finance receivables and vehicles and Investments in and transactions with affiliated companies equipment on operating leases for the years ended March 31, 2009, 2010 and 2011 is as follows: Summarized financial information for affiliated companies accounted for by the equity method is shown below: Yen in millions U.S. dollars in millions For the year ended Yen in millions U.S. dollars in millions For the years ended March 31, March 31, March 31, March 31, 2009 2010 2011 2011 2010 2011 2011 Allowance for credit losses at beginning of year ¥ 117,706 ¥ 238,932 ¥ 232,479 $ 2,796 Current assets ¥ 8,034,546 ¥ 7,973,712 $ 95,895 Provision for credit losses 259,096 98,870 2,334 28 Noncurrent assets 9,300,307 6,815,361 81,965 Charge-offs (128,240) (118,333) (86,115) (1,036) Total assets ¥17,334,853 ¥14,789,073 $177,860 Recoveries 11,447 16,137 18,268 220 Current liabilities ¥ 5,056,178 ¥ 5,141,461 $ 61,833 Other (21,077) (3,127) 649 8 Long-term liabilities and noncontrolling interest 5,981,054 3,726,952 44,822 Allowance for credit losses at end of year ¥ 238,932 ¥ 232,479 ¥ 167,615 $ 2,016 Affiliated companies accounted for by the equity method shareholders’ equity 6,297,621 5,920,660 71,205 The other amount primarily includes the impact of currency translation adjustments for the years Total liabilities and shareholders’ equity ¥17,334,853 ¥14,789,073 $177,860 Toyota’s share of affiliated companies accounted for by the ended March 31, 2009, 2010 and 2011. equity method shareholders’ equity ¥ 1,867,440 ¥ 1,817,988 $ 21,864 An analysis of the allowance for credit losses above relating to retail receivables portfolio segment, Number of affiliated companies accounted for by the equity finance lease receivables portfolio segment and wholesale and other dealer loan receivables portfolio method at end of period 56 56 segment for the year ended March 31, 2011 is as follows:

TOYOTA ANNUAL REPORT 2011 84 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

Account balances and transactions with affiliated companies are presented below: Yen in millions U.S. dollars in millions

For the year Yen in millions U.S. dollars in millions For the years ended March 31, ended March 31, March 31, March 31, 2009 2010 2011 2011 2010 2011 2011 Net revenues ¥23,149,968 ¥20,599,586 ¥21,874,143 $263,068 Trade accounts and notes receivable, and other receivables ¥274,189 ¥204,447 $2,459 Gross profit ¥ 2,034,617 ¥ 2,269,109 ¥ 2,342,706 $ 28,174 Accounts payable and other payables 597,796 352,538 4,240 Net income attributable to affiliated companies accounted for by the equity method ¥ 13,838 ¥ 317,017 ¥ 641,771 $ 7,718 Yen in millions U.S. dollars in millions For the year Entities comprising a significant portion of Toyota’s investment in affiliated companies and percentage For the years ended March 31, ended March 31, of ownership are presented below: 2009 2010 2011 2011 Net revenues ¥1,585,814 ¥1,600,365 ¥1,612,397 $19,391 Name of affiliated companies Percentage of ownership Purchases 3,918,717 3,943,648 3,655,185 43,959 Denso Corporation 24.7% Aisin Seiki Co., Ltd 23.1% Dividends from affiliated companies absorb losses of the VIEs or the right to receive Toyota Industries Corporation 24.8% accounted for by the equity method for the years benefits from the VIEs that could potentially be Toyota Tsusho Corporation 21.8% ended March 31, 2009, 2010 and 2011 were significant to the VIEs. As a result, Toyota is Toyoda Gosei Co., Ltd 43.1% ¥114,409 million, ¥82,149 million and ¥103,169 considered the primary beneficiary of the VIEs million ($1,241 million), respectively. and therefore consolidates the VIEs. Certain affiliated companies accounted for companies” in the accompanying consolidated Toyota does not have any significant related The consolidated securitization VIEs have by the equity method with carrying amounts of statements of income. Toyota evaluated its invest- party transactions other than transactions with ¥1,111,212 million ($13,364 million) in retail finance ¥1,439,090 million and ¥1,384,159 million ($16,647 ments in affiliated companies, considering the affiliated companies in the ordinary course of receivables, ¥64,502 million ($776 million) in million) at March 31, 2010 and 2011, respectively, length of time and the extent to which the quoted business. restricted cash and ¥941,613 million ($11,324 were quoted on various established markets at an market prices have been less than the carrying million) in secured debt. Risks to which Toyota is aggregate value of ¥1,711,957 million and amounts, the financial condition and near-term Variable Interest Entities exposed including credit, interest rate, and/or ¥1,475,352 million ($17,743 million), respectively. prospects of the affiliated companies and Toyota’s Toyota enters into securitization transactions prepayment risks are not incremental compared For the year ended March 31, 2010, Toyota ability and intent to retain those investments in the using special-purpose entities, that are consid- with the situation before Toyota enters into securi- recognized an impairment loss on a certain companies for a period of time. Toyota did not ered variable interest entities (“VIEs”). Although tization transactions. investment in affiliated company accounted for recognize any impairment loss for the year ended the finance receivables related to securitization As for VIEs other than those specified above, by the equity method of ¥63,575 million, which is March 31, 2011. transactions have been legally sold to the VIEs, neither the aggregate size of these VIEs nor included in “Equity in earnings of affiliated Toyota has both the power to direct the activities Toyota’s involvements in these VIEs are material of the VIEs that most significantly impact the VIEs’ to Toyota’s consolidated financial statements. economic performance and the obligation to

TOYOTA ANNUAL REPORT 2011 85 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

13 Short-term borrowings and long-term debt: As of March 31, 2011, approximately 31%, ($688 million) and in addition, other assets 24%, 12% and 33% of long-term debt are denomi- aggregating ¥1,128,957 million ($13,577 million) Short-term borrowings at March 31, 2010 and 2011 consist of the following: nated in Japanese yen, U.S. dollars, euros, and were pledged as collateral mainly for certain debt other currencies, respectively. obligations of subsidiaries. These other assets Yen in millions U.S. dollars in millions As of March 31, 2011, property, plant and principally consist of securitized finance March 31, March 31, equipment with a book value of ¥57,237 million receivables. 2010 2011 2011 Loans, principally from banks, with a weighted-average interest at March 31, 2010 and March 31, 2011 of 1.55% and of 1.57% per The aggregate amounts of annual maturities of long-term debt during the next five years are as follows: annum, respectively ¥ 804,066 ¥1,140,066 $13,711 Commercial paper with a weighted-average interest at March 31, 2010 Years ending March 31, Yen in millions U.S. dollars in millions and March 31, 2011 of 0.44% and of 0.67% per annum, respectively 2,475,607 2,038,943 24,521 2012 ¥2,772,827 $33,347 ¥3,279,673 ¥3,179,009 $38,232 2013 1,834,556 22,063 2014 1,522,659 18,312 As of March 31, 2011, “Loans, principally from million ($23,504 million) of which ¥464,564 million 2015 900,120 10,825 banks” amount includes secured loans by finance ($5,587 million) related to commercial paper 2016 1,106,492 13,307 receivables securitization of ¥335,539 million programs. Under these programs, Toyota is ($4,035 million). authorized to obtain short-term financing at As of March 31, 2011, Toyota has unused prevailing interest rates for periods not in excess Standard agreements with certain banks in During the year ended March 31, 2011, Toyota short-term lines of credit amounting to ¥1,954,330 of 360 days. Japan include provisions that collateral (including has not received any significant such requests sums on deposit with such banks) or guarantees from these banks. Long-term debt at March 31, 2010 and 2011 comprises the following: will be furnished upon the banks’ request and that As of March 31, 2011, Toyota has unused any collateral furnished, pursuant to such long-term lines of credit amounting to ¥8,073,898 Yen in millions U.S. dollars in millions agreements or otherwise, will be applicable to all million ($97,100 million). March 31, March 31, present or future indebtedness to such banks. 2010 2011 2011 Unsecured loans, representing obligations principally to banks, due 2010 to 2029 in 2010 and due 2011 to 2029 in 2011 with interest ranging from 0.00% to 29.25% per annum in 2010 and from 0.00% to 29.00% per annum in 2011 ¥ 2,942,012 ¥ 3,386,854 $ 40,732 Secured loans, representing obligations principally to finance receivables securitization Product warranties and recalls and other safety measures: due 2010 to 2019 in 2010 and due 2011 to 2050 in 2011 with interest ranging from 14 0.49% to 6.65% per annum in 2010 and from 0.37% to 5.35% per annum in 2011 381,307 619,380 7,449 Medium-term notes of consolidated subsidiaries, due 2010 to 2047 in 2010 and Toyota provides product warranties for certain vehicle sale based on the amount estimated from due 2011 to 2047 in 2011 with interest ranging from 0.04% to 15.25% per annum in 2010 and from 0.01% to 15.25% per annum in 2011 3,814,439 3,314,589 39,863 defects mainly resulting from manufacturing historical experience. Unsecured notes of parent company, due 2010 to 2019 in 2010 and due 2012 based on warranty contracts with its customers at Liabilities for product warranties and liabilities to 2019 in 2011 with interest ranging from 1.07% to 3.00% per annum in 2010 the time of sale of products. Toyota accrues for recalls and other safety measures have been and from 1.07% to 3.00% per annum in 2011 580,000 530,000 6,374 estimated warranty costs to be incurred in the combined into a single table showing an Unsecured notes of consolidated subsidiaries, due 2010 to 2031 in 2010 and due 2011 to 2031 in 2011 with interest ranging from 0.25% to 17.03% per future in accordance with the warranty contracts. aggregate liability for quality assurances due to annum in 2010 and from 0.27% to 15.48% per annum in 2011 1,473,732 1,349,307 16,227 In addition to product warranties, Toyota initiates the fact that both are liabilities for costs to repair Long-term capital lease obligations, due 2010 to 2028 in 2010 and due 2011 to 2028 in 2011 with interest ranging from 0.43% to 14.40% per annum in 2010 recalls and other safety measures to repair or to or replace defects of vehicles and the amounts and from 0.38% to 14.40% per annum in 2011 42,243 21,917 263 replace parts which might be expected to fail incurred to repair or replace defects of vehicles 9,233,733 9,222,047 110,908 from products safety perspectives or customer may affect the amounts incurred for product Less - Current portion due within one year (2,218,324) (2,772,827) (33,347) satisfaction standpoints. Toyota accrues for costs warranties and vice versa. ¥ 7,015,409 ¥ 6,449,220 $ 77,561 of recalls and other safety measures at the time of

TOYOTA ANNUAL REPORT 2011 86 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

The net changes in liabilities for quality assurances above for the years ended March 31, 2009, 2010 16 Income taxes: and 2011 consist of the following: The components of income (loss) before income taxes comprise the following: Yen in millions U.S. dollars in millions For the year Yen in millions U.S. dollars in millions For the years ended March 31, ended March 31, For the year 2009 2010 2011 2011 For the years ended March 31, ended March 31, Liabilities for quality assurances at beginning of year ¥ 499,987 ¥ 568,834 ¥ 680,408 $ 8,183 2009 2010 2011 2011 Payments made during year (407,675) (425,976) (476,771) (5,734) Income (loss) before income taxes: Provision for quality assurances 526,503 558,190 588,224 7,074 Parent company and domestic subsidiaries ¥(224,965) ¥(114,569) ¥(278,229) $(3,346) Changes relating to pre-existing quality assurances (17,869) (21,606) (1,701) (20) Foreign subsidiaries (335,416) 406,037 841,519 10,120 Other (32,112) 966 (25,791) (310) ¥(560,381) ¥ 291,468 ¥ 563,290 $ 6,774 Liabilities for quality assurances at end of year ¥ 568,834 ¥ 680,408 ¥ 764,369 $ 9,193 The provision for income taxes consists of the following: The other amount primarily includes the impact of currency translation adjustments and the impact Yen in millions U.S. dollars in millions of consolidation and deconsolidation of certain entities due to changes in ownership interest. For the year For the years ended March 31, ended March 31, The table below shows the net changes in liabilities for recalls and other safety measures which are 2009 2010 2011 2011 comprised in liabilities for quality assurances above for the years ended March 31, 2009, 2010 and 2011. Current income tax expense: Parent company and domestic subsidiaries ¥ 65,684 ¥ 65,971 ¥ 85,290 $1,026 Yen in millions U.S. dollars in millions Foreign subsidiaries 72,864 1,156 141,821 1,705 For the year Total current 138,548 67,127 227,111 2,731 For the years ended March 31, ended March 31, 2009 2010 2011 2011 Deferred income tax expense (benefit): Liabilities for recalls and other safety measures Parent company and domestic subsidiaries (26,472) (126,716) (44,268) (532) at beginning of year ¥ 53,603 ¥139,577 ¥ 301,422 $ 3,625 Foreign subsidiaries (168,518) 152,253 129,978 1,563 Payments made during year (69,812) (89,796) (263,096) (3,164) Total deferred (194,990) 25,537 85,710 1,031 Provision for recalls and other safety measures 159,899 256,981* 356,749 4,290 Total provision ¥ (56,442) ¥ 92,664 ¥312,821 $3,762 Other (4,113) (5,340) (5,576) (67) Liabilities for recalls and other safety measures Toyota is subject to a number of different Such rate was also used to calculate the tax at end of year ¥139,577 ¥301,422 ¥ 389,499 $ 4,684 income taxes which, in the aggregate, indicate a effects of temporary differences, which are * Toyota has employed an estimation model to accrue of expenses for future recalls and other safety measures at the time of vehicle sale based on the amount estimated from historical experience from the fourth quarter of the fiscal year ended March 31, 2010. This change has statutory rate in Japan of approximately 40.2% for expected to be realized in the future years. resulted in an increase in provision for recalls and other safety measures in this table by ¥105,698 million. the years ended March 31, 2009, 2010 and 2011.

15 Other payables:

Other payables are mainly related to purchases of property, plant and equipment and non-manufacturing purchases.

TOYOTA ANNUAL REPORT 2011 87 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

Reconciliation of the differences between the statutory tax rate and the effective income tax rate is The valuation allowance mainly relates to The net changes in the total valuation allowance as follows: deferred tax assets of the consolidated subsid- for deferred tax assets for the years ended March iaries with operating loss carryforwards for tax 31, 2009, 2010 and 2011 consist of the following: For the years ended March 31, purposes that are not expected to be realized. 2009 2010 2011

Statutory tax rate 40.2％ 40.2％ 40.2％ Yen in millions U.S. dollars in millions Increase (reduction) in taxes resulting from: For the year Non-deductible expenses (5.0) 1.9 2.2 For the years ended March 31, ended March 31, Deferred tax liabilities on undistributed earnings of foreign subsidiaries (2.5) 4.4 4.8 2009 2010 2011 2011 Deferred tax liabilities on undistributed earnings of affiliates Valuation allowance at beginning of year ¥ 82,191 ¥208,627 ¥239,269 $2,877 accounted for by the equity method (2.5) (0.6) 12.6 Additions 145,707 46,704 55,791 671 Valuation allowance (25.4) 11.2 8.1 Deductions (3,511) (14,066) (10,077) (121) Tax credits 10.0 (11.8) (2.6) Other (15,760) (1,996) (4,298) (52) The difference between the statutory tax rate in Japan and that of foreign subsidiaries 1.6 (12.9) (12.1) Valuation allowance at end of year ¥208,627 ¥239,269 ¥280,685 $3,375 Other (6.3) (0.6) 2.3 Effective income tax rate 10.1% 31.8％ 55.5％ The other amount includes the impact of strategies that are prudent and feasible. All consolidation and deconsolidation of certain available evidence, both positive and negative, is Significant components of deferred tax assets and liabilities are as follows: entities due to changes in ownership interest and considered to determine whether, based on the currency translation adjustments during the years weight of that evidence, a valuation allowance is Yen in millions U.S. dollars in millions ended March 31, 2009, 2010 and 2011. The needed. Toyota believes that it is more likely than March 31, March 31, factors used to assess the likelihood of realization not that the net deferred tax assets will be realized 2010 2011 2011 of the deferred tax assets are the future reversal through future taxable income. Failure to achieve Deferred tax assets Accrued pension and severance costs ¥ 210,268 ¥ 226,093 $ 2,719 of existing taxable temporary differences, the the forecasted taxable income, however, could Accrued expenses and liabilities for quality assurances 277,696 395,513 4,757 future taxable income and available tax planning affect the realization of deferred tax assets. Other accrued employees’ compensation 106,404 103,020 1,239 Operating loss carryforwards for tax purposes 146,114 296,731 3,568 The deferred tax assets and liabilities that comprise the net deferred tax liability are included in the Tax credit carryforwards 73,061 127,289 1,531 consolidated balance sheets as follows: Property, plant and equipment and other assets 188,745 176,229 2,119 Other 474,380 277,449 3,337 Yen in millions U.S. dollars in millions Gross deferred tax assets 1,476,668 1,602,324 19,270 March 31, March 31, Less - Valuation allowance (239,269) (280,685) (3,375) 2010 2011 2011 Total deferred tax assets ¥ 1,237,399 ¥ 1,321,639 $ 15,895 Deferred tax assets Deferred tax liabilities Deferred income taxes (Current assets) ¥ 632,164 ¥ 605,884 $ 7,287 Unrealized gains on securities (147,494) (146,874) (1,766) Investments and other assets - other 122,617 118,849 1,429 Undistributed earnings of foreign subsidiaries (12,797) (26,783) (322) Deferred tax liabilities Undistributed earnings of affiliates accounted for by the equity method (575,929) (578,756) (6,961) Other current liabilities (9,338) (14,919) (179) Basis difference of acquired assets (38,977) (38,351) (461) Lease transactions (457,316) (537,174) (6,460) Deferred income taxes (Long-term liabilities) (813,221) (810,127) (9,743) Gain on securities contribution to employee retirement benefit trust (66,523) (66,523) (800) Net deferred tax liability ¥ (67,778) ¥(100,313) $(1,206) Other (6,141) (27,491) (331) Gross deferred tax liabilities (1,305,177) (1,421,952) (17,101) Because management intends to reinvest the extent not expected to be remitted in the Net deferred tax liability ¥ (67,778) ¥ (100,313) $ (1,206) undistributed earnings of foreign subsidiaries to foreseeable future, management has made no

TOYOTA ANNUAL REPORT 2011 88 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

provision for income taxes on those undistributed million ($10,759 million) and are available as an 17 Shareholders’ equity: earnings aggregating ¥2,709,626 million ($32,587 offset against future taxable income. The majority million) as of March 31, 2011. Toyota estimates an of these carryforwards expire in years 2012 to Changes in the number of shares of common stock issued have resulted from the following: additional tax provision of ¥100,957 million ($1,214 2030. Tax credit carryforwards as of March 31, For the years ended March 31, million) would be required if the full amount of 2011 were ¥127,289 million ($1,531 million) and 2009 2010 2011 those undistributed earnings were remitted. the majority of these carryforwards expire in years Common stock issued Operating loss carryforwards for tax purposes 2012 to 2014. Balance at beginning of year 3,447,997,492 3,447,997,492 3,447,997,492 as of March 31, 2011 were approximately ¥894,587 Issuance during the year ― ― ― Purchase and retirement ― ― ― Balance at end of year 3,447,997,492 3,447,997,492 3,447,997,492 A summary of the gross unrecognized tax benefits changes for the years ended March 31, 2009, 2010 and 2011 is as follows: The Corporation Act provides that an amount include amounts representing year-end cash Yen in millions U.S. dollars in millions equal to 10% of distributions from surplus paid by dividends of ¥94,071 million ($1,131 million), ¥30 For the year For the years ended March 31, ended March 31, the parent company and its Japanese subsid- ($0.36) per share, which were approved at the 2009 2010 2011 2011 iaries be appropriated as a capital reserve or a Ordinary General Shareholders’ Meeting, held on Balance at beginning of year ¥ 37,722 ¥ 46,803 ¥ 23,965 $ 288 retained earnings reserve. No further appropria- June 17, 2011. Additions based on tax positions related to the tions are required when the total amount of the Retained earnings at March 31, 2011 include 858 2,702 current year 213 3 capital reserve and the retained earnings reserve ¥1,401,985 million ($16,861 million) relating to Additions for tax positions of prior years 35,464 6,750 12,564 151 reaches 25% of stated capital. equity in undistributed earnings of companies Reductions for tax positions of prior years (24,061) (2,802) (16,133) (194) The retained earnings reserve included in accounted for by the equity method. Reductions for tax positions related to lapse of statute of limitations (114) (106) — — retained earnings as of March 31, 2010 and 2011 On June 22, 2007, at the Ordinary General Reductions for settlements (128) (27,409) (2,794) (34) was ¥168,680 million and ¥171,062 million ($2,057 Shareholders’ Meeting, the shareholders of the Other (2,938) (1,973) (2,362) (28) million), respectively. The Corporation Act parent company approved to purchase up to 30 Balance at end of year ¥ 46,803 ¥ 23,965 ¥ 15,453 $ 186 provides that the retained earnings reserve of the million shares of its common stock at a cost up to parent company and its Japanese subsidiaries is ¥250,000 million during the purchase period of The amount of unrecognized tax benefits net”. The amounts of interest and penalties restricted and unable to be used for dividend one year from the following day. As a result, the that, if recognized, would affect the effective tax accrued as of and recognized for the years ended payments, and is excluded from the calculation of parent company repurchased 30 million shares rate was not material at March 31, 2009, 2010 and March 31, 2009, 2010 and 2011, respectively, the profit available for dividend. during the approved period of time. 2011, respectively. Toyota does not believe it is were not material. The amounts of statutory retained earnings of On February 5, 2008, the Board of Directors reasonably possible that the total amounts of Toyota remains subject to income tax the parent company available for dividend resolved to purchase up to 12 million shares of its unrecognized tax benefits will significantly increase examination for the tax returns related to the years payments to shareholders were ¥5,478,747 million common stock at a cost up to ¥60,000 million in or decrease within the next twelve months. beginning on and after January 1, 2004 and and ¥5,389,432 million ($64,816 million) as of accordance with the Corporation Act. As a result, Interest and penalties related to income tax 2000, with various tax jurisdictions in Japan and March 31, 2010 and 2011, respectively. In the parent company repurchased approximately liabilities are included in “Other income (loss), foreign countries, respectively. accordance with customary practice in Japan, the 10 million shares. distributions from surplus are not accrued in the On the same date, the Board of Directors also financial statements for the corresponding period, resolved to retire 162 million shares of its common but are recorded in the subsequent accounting stock, and then the parent company retired its period after shareholders’ approval has been common stock on March 31, 2008. This retire- obtained. Retained earnings at March 31, 2011 ment, in accordance with the Corporation Act

TOYOTA ANNUAL REPORT 2011 89 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

and related regulations, is treated as a reduction parent company approved to purchase up to 30 Tax effects allocated to each component of other comprehensive income (loss) for the years ended from additional paid-in capital and retained million shares of its common stock at a cost up to March 31, 2009, 2010 and 2011 are as follows: earnings. As a result, treasury stock, additional ¥200,000 million during the purchase period of Yen in millions paid-in capital and retained earnings decreased one year from the following day. As a result, the Pre-tax amount Tax amount Net-of-tax amount by ¥646,681 million, ¥3,499 million and ¥643,182 parent company repurchased approximately 14 million, respectively. million shares during the approved period of time. For the year ended March 31, 2009 On June 24, 2008, at the Ordinary General These approvals by the shareholders are not Foreign currency translation adjustments ¥ (391,873) ¥ 10,570 ¥(381,303) Unrealized losses on securities: Shareholders’ Meeting, the shareholders of the required under the current regulation. Unrealized net holding losses arising for the year (677,710) 255,890 (421,820) Less: reclassification adjustments for losses included in net loss attributable to Toyota Motor Corporation 215,249 (86,530) 128,719 Detailed components of accumulated other comprehensive income (loss) in Toyota Motor Corpora- Pension liability adjustments (319,613) 127,441 (192,172) tion shareholders’ equity at March 31, 2010 and 2011 and the related changes, net of taxes for the years Other comprehensive income (loss) ¥(1,173,947) ¥ 307,371 ¥(866,576) ended March 31, 2009, 2010 and 2011 consist of the following: For the year ended March 31, 2010 Foreign currency translation adjustments ¥ 10,809 ¥ (915) ¥ 9,894 Yen in millions Unrealized gains on securities: Foreign currency Accumulated other Unrealized net holding gains arising for the year 277,838 (102,538) 175,300 translation Unrealized gains on Pension liability comprehensive adjustments securities adjustments income (loss) Less: reclassification adjustments for losses included in net income attributable to Toyota Motor Corporation 1,852 (745) 1,107 Balances at March 31, 2008 ¥ (501,367) ¥ 310,979 ¥ (50,817) ¥ (241,205) Pension liability adjustments 124,526 (49,881) 74,645 Other comprehensive income (loss) (381,303) (293,101) (192,172) (866,576) Other comprehensive income ¥ 415,025 ¥(154,079) ¥ 260,946 Balances at March 31, 2009 (882,670) 17,878 (242,989) (1,107,781) For the year ended March 31, 2011 Other comprehensive income 9,894 176,407 74,645 260,946 Foreign currency translation adjustments ¥ (294,279) ¥ 6,666 ¥(287,613) Balances at March 31, 2010 (872,776) 194,285 (168,344) (846,835) Unrealized losses on securities: Other comprehensive income (loss) (287,613) (26,058) 15,785 (297,886) Unrealized net holding losses arising for the year (31,899) 9,643 (22,256) Balances at March 31, 2011 ¥(1,160,389) ¥ 168,227 ¥(152,559) ¥(1,144,721) Less: reclassification adjustments for gains included in net income attributable to Toyota Motor Corporation (6,358) 2,556 (3,802) Pension liability adjustments 26,681 (10,896) 15,785 U.S. dollars in millions Other comprehensive income (loss) ¥ (305,855) ¥ 7,969 ¥(297,886) Foreign currency Accumulated other translation Unrealized gains on Pension liability comprehensive adjustments securities adjustments income (loss) U.S. dollars in millions Balances at March 31, 2010 $(10,496) $2,337 $(2,025) $(10,184) Pre-tax amount Tax amount Net-of-tax amount Other comprehensive income (loss) (3,459) (314) 190 (3,583) For the year ended March 31, 2011 Balances at March 31, 2011 $(13,955) $2,023 $(1,835) $(13,767) Foreign currency translation adjustments $(3,539) $ 80 $(3,459) Unrealized losses on securities: Unrealized net holding losses arising for the year (384) 116 (268) Less: reclassification adjustments for gains included in net income attributable to Toyota Motor Corporation (77) 31 (46) Pension liability adjustments 321 (131) 190 Other comprehensive income (loss) $(3,679) $ 96 $(3,583)

TOYOTA ANNUAL REPORT 2011 90 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

18 Stock-based compensation: The following table summarizes Toyota’s stock option activity:

Yen Yen in millions In June 1997, the parent company’s shareholders For the years ended March 31, 2009, 2010 Weighted- approved a stock option plan for board members. and 2011, Toyota recognized stock-based Weighted-average average remaining Aggregate In June 2001, the shareholders approved an compensation expenses for stock options of Number of exercise contractual life in intrinsic shares price years value amendment of the plan to include both board ¥3,015 million, ¥2,446 million and ¥2,522 million Options outstanding at March 31, 2008 8,341,600 ¥6,038 5.71 ¥1,753 members and key employees. Each year until ($30 million) as selling, general and administrative Granted 3,494,000 4,726 June 2010, since the plans’ inception, the expenses. Exercised (119,900) 3,626 shareholders have approved the authorization for The weighted-average grant-date fair value of Canceled (375,000) 6,889 the grant of options for the purchase of Toyota’s options granted during the years ended March 31, Options outstanding at March 31, 2009 11,340,700 5,631 5.51 ¥ 1 common stock. Authorized shares for each year 2009, 2010 and 2011 was ¥635, ¥803 and ¥724 Granted 3,492,000 4,193 that remain ungranted are unavailable for grant in ($9), respectively per share. The fair value of Exercised (157,800) 3,116 future years. Stock options granted in and after options granted is amortized over the option Canceled (958,200) 4,646 August 2002 have terms ranging from 6 years to vesting period in determining net income attribut- Options outstanding at March 31, 2010 13,716,700 5,363 5.23 ¥ — 8 years and an exercise price equal to 1.025 able to Toyota Motor Corporation in the Granted 3,435,000 3,183 times the closing price of Toyota’s common stock consolidated statements of income. The grant- Exercised — — on the date of grant. These options generally vest date fair value of options granted is estimated Canceled (1,364,900) 4,759 2 years from the date of grant. using the Black-Scholes option pricing model with Options outstanding at March 31, 2011 15,786,800 ¥4,941 5.04 ¥ 565 the following weighted-average assumptions: Options exercisable at March 31, 2009 4,971,700 ¥5,302 3.76 ¥ 1 Options exercisable at March 31, 2010 7,515,700 ¥6,132 3.86 ¥ — Options exercisable at March 31, 2011 9,347,800 ¥5,821 3.79 ¥ — 2009 2010 2011 Dividend rate 3.0% 2.4% 1.5% The total intrinsic value of options exercised for expenses are expected to be recognized over a Risk-free interest rate 1.1% 0.7% 0.3% the years ended March 31, 2009 and 2010 was ¥97 weighted-average period of 1.1 years. Expected volatility 23% 30% 32% million and ¥113 million, respectively. No options Cash received from the exercise of stock Expected holding period (years) 5.0 5.0 5.0 were exercised for the year ended March 31, 2011. options for the years ended March 31, 2009 and As of March 31, 2011, there were unrecog- 2010 was ¥435 million and ¥492 million, respec- nized compensation expenses of ¥1,693 million tively. No cash was received from the exercise of ($20 million) for stock options granted. Those stock options for the year ended March 31, 2011.

The following table summarizes information for options outstanding and options exercisable at March 31, 2011:

Outstanding Exercisable Exercise Weighted-average Weighted-average Weighted-average price range Number of exercise price remaining life Number of exercise price Yen shares Yen Dollars Years shares Yen Dollars ¥3,183-6,000 10,508,800 ¥4,030 $48 5.63 4,069,800 ¥4,611 $55 6,001-7,278 5,278,000 6,754 81 3.87 5,278,000 6,754 81 3,183-7,278 15,786,800 4,941 59 5.04 9,347,800 5,821 70

TOYOTA ANNUAL REPORT 2011 91 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

19 Employee benefit plans: Information regarding Toyota’s defined benefit plans is as follows:

Yen in millions U.S. dollars in millions Pension and severance plans The parent company and most subsidiaries in March 31, March 31, Upon terminations of employment, employees of Japan have contributory funded defined benefit 2010 2011 2011 the parent company and subsidiaries in Japan are pension plans, which are pursuant to the Corporate Change in benefit obligation entitled, under the retirement plans of each Defined Benefit Pension Plan Law (CDBPPL). The Benefit obligation at beginning of year ¥1,632,779 ¥1,726,747 $20,767 company, to lump-sum indemnities or pension contributions to the plans are funded with several Service cost 75,558 82,422 991 payments, based on current rates of pay and financial institutions in accordance with the Interest cost 50,559 52,502 631 lengths of service or the number of “points” mainly applicable laws and regulations. These pension Plan participants’ contributions 657 1,046 13 determined by those. Under normal circum- plan assets consist principally of common stocks, Plan amendments (3,080) (1,429) (17) stances, the minimum payment prior to retirement government bonds and insurance contracts. Net actuarial loss 56,843 3,830 46 age is an amount based on voluntary retirement. Most foreign subsidiaries have pension plans Acquisition and other (2,829) (57,928) (697) Employees receive additional benefits on involun- or severance indemnity plans covering substan- Benefits paid (83,740) (78,012) (938) tary retirement, including retirement at the age tially all of their employees under which the cost of Benefit obligation at end of year 1,726,747 1,729,178 20,796 limit. benefits are currently invested or accrued. The Change in plan assets Effective October 1, 2004, the parent company benefits for these plans are based primarily on Fair value of plan assets at beginning of year 979,012 1,179,051 14,180 amended its retirement plan to introduce a “point” lengths of service and current rates of pay. Actual return on plan assets 171,043 24,216 291 based retirement benefit plan. Under the new Toyota uses a March 31 measurement date Acquisition and other 158 (39,374) (474) plan, employees are entitled to lump-sum or for its benefit plans. Employer contributions 111,815 96,458 1,160 pension payments determined based on accumu- Plan participants’ contributions 763 1,046 13 lated “points” vested in each year of service. Benefits paid (83,740) (78,012) (938) There are three types of “points” that vest in Fair value of plan assets at end of year 1,179,051 1,183,385 14,232 each year of service consisting of “service period Funded status ¥ 547,696 ¥ 545,793 $ 6,564 points” which are attributed to the length of service, “job title points” which are attributed to the job title Amounts recognized in the consolidated balance sheet as of March 31, 2010 and 2011 are comprised of each employee, and “performance points” of the following: which are attributed to the annual performance Yen in millions U.S. dollars in millions evaluation of each employee. Under normal March 31, March 31, circumstances, the minimum payment prior to 2010 2011 2011 retirement age is an amount reflecting an adjust- Accrued expenses (Accrued pension and severance costs) ¥ 28,573 ¥ 24,677 $ 297 ment rate applied to represent voluntary retirement. Accrued pension and severance costs 678,677 668,022 8,034 Employees receive additional benefits upon Investments and other assets - other (Prepaid pension and severance costs) (159,554) (146,906) (1,767) involuntary retirement, including retirement at the Net amount recognized ¥ 547,696 ¥ 545,793 $ 6,564 age limit. Effective October 1, 2005, the parent company partly amended its retirement plan and introduced the quasi cash-balance plan under which benefits are determined based on the variable-interest crediting rate rather than the fixed-interest crediting rate as was in the pre-amended plan.

TOYOTA ANNUAL REPORT 2011 92 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

Amounts recognized in accumulated other comprehensive income (loss) as of March 31, 2010 and Other changes in plan assets and benefit obligations recognized in other comprehensive income 2011 are comprised of the following: (loss) are as follows:

Yen in millions U.S. dollars in millions Yen in millions U.S. dollars in millions March 31, March 31, For the year 2010 2011 2011 For the years ended March 31, ended March 31, Net actuarial loss ¥(385,266) ¥(347,494) $(4,179) 2009 2010 2011 2011 Prior service costs 97,587 72,324 870 Net actuarial gain (loss) ¥(303,074) ¥ 81,949 ¥(21,978) $(264) Net transition obligation (3,570) (1,626) (20) Recognized net actuarial loss 5,752 27,246 16,095 194 Net amount recognized ¥(291,249) ¥(276,796) $(3,329) Prior service costs 2,096 3,080 1,429 17 Amortization of prior service costs (17,677) (15,063) (24,032) (289) Amortization of net transition obligation 1,944 1,944 1,944 23 The accumulated benefit obligation for all defined benefit pension plans was ¥1,571,061 million and Other 17,003 2,594 40,995 493 ¥1,584,627 million ($19,057 million) at March 31, 2010 and 2011, respectively. Total recognized in other comprehensive income (loss) ¥(293,956) ¥101,750 ¥ 14,453 $ 174

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for The other amount includes the impact of The estimated prior service costs, net actuarial which the accumulated benefit obligations exceed plan assets are as follows: transition to defined contribution pension plans, loss and net transition obligations that will be consolidation and deconsolidation of certain amortized from accumulated other comprehensive Yen in millions U.S. dollars in millions entities due to changes in ownership interest and income (loss) into net periodic pension cost during March 31, March 31, currency translation adjustments during the years the year ending March 31, 2012 are ¥(15,700) 2010 2011 2011 ended March 31, 2009, 2010 and 2011. million ($(189) million), ¥16,000 million ($192 million) Projected benefit obligation ¥508,501 ¥500,046 $6,014 and ¥1,900 million ($23 million), respectively. Accumulated benefit obligation 452,019 453,111 5,449 Fair value of plan assets 65,905 72,359 870

Weighted-average assumptions used to determine benefit obligations as of March 31, 2010 and 2011 Components of the net periodic pension cost are as follows: are as follows:

Yen in millions U.S. dollars in millions March 31, For the year 2010 2011 For the years ended March 31, ended March 31, Discount rate 2.8% 2.8% 2009 2010 2011 2011 Rate of compensation increase 0.5-10.0% 0.8-11.0% Service cost ¥ 84,206 ¥ 75,558 ¥ 82,422 $ 991 Interest cost 52,959 50,559 52,502 631 Expected return on plan assets (43,053) (32,251) (42,364) (509) Weighted-average assumptions used to determine net periodic pension cost for the years ended Amortization of prior service costs (17,677) (15,063) (24,032) (289) March 31, 2009, 2010 and 2011 are as follows: Recognized net actuarial loss 5,752 27,246 16,095 194 Amortization of net transition obligation 1,944 1,944 1,944 23 For the years ended March 31, 2009 2010 2011 Net periodic pension cost ¥ 84,131 ¥107,993 ¥ 86,567 $1,041 Discount rate 2.8% 2.8% 2.8% Expected return on plan assets 3.6% 3.6% 3.8% Rate of compensation increase 0.1-10.0% 0.1-10.0% 0.5-10.0%

TOYOTA ANNUAL REPORT 2011 93 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

The expected rate of return on plan assets is approximately 30% is invested in debt securities, Yen in millions U.S. dollars in millions determined after considering several applicable and the rest of them is invested in insurance March 31, 2011 March 31, 2011 factors including, the composition of plan assets contracts and other products. When actual alloca- Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total held, assumed risks of asset management, tions are not in line with target allocations, Toyota Equity securities historical results of the returns on plan assets, rebalances its investments in accordance with the Common stocks ¥489,759 ¥ ― ¥ ― ¥ 489,759 $5,890 $ — $ — $ 5,890 Toyota’s principal policy for plan asset manage- policies. Prior to making individual investments, Commingled funds ― 180,901 ― 180,901 — 2,176 — 2,176 ment, and forecasted market conditions. Toyota performs in-depth assessments of 489,759 180,901 ― 670,660 5,890 2,176 — 8,066 Toyota’s policy and objective for plan asset corresponding factors including category of Debt securities management is to maximize returns on plan assets products, industry type, currencies and liquidity of Government bonds 82,685 ―― 82,685 995 — — 995 to meet future benefit payment requirements each potential investment under consideration to Commingled funds ― 159,232 ― 159,232 — 1,915 — 1,915 under risks which Toyota considers permissible. mitigate concentrations of risks such as market Other 29,217 44,994 746 74,957 351 541 9 901 Asset allocations under the plan asset manage- risk and foreign currency exchange rate risk. To 111,902 204,226 746 316,874 1,346 2,456 9 3,811 ment are determined based on plan asset assess performance of the investments, Toyota Insurance contracts ― 90,972 ― 90,972 — 1,094 — 1,094 management policies of each plan which are establishes bench mark return rates for each Other 19,610 26,418 58,851 104,879 236 317 708 1,261 established to achieve the optimized asset individual investment, combines these individual Total ¥621,271 ¥502,517 ¥59,597 ¥1,183,385 $7,472 $6,043 $717 $14,232 compositions in terms of the long-term overall plan bench mark rates based on the asset composition asset management. Excepting equity securities ratios within each asset category, and compares contributed by Toyota, approximately 50% of the the combined rates with the corresponding actual The following is description of the assets, Commingled funds are beneficial interests of plan assets is invested in equity securities, return rates on each asset category. information about the valuation techniques used collective trust, which are mainly invested by the to measure fair value, key inputs and significant parent company and Japanese subsidiaries. The assumptions: fair values of commingled funds are measured The following table summarizes the fair value of classes of plan assets as of March 31, 2010 and Quoted market prices for identical securities using the net asset value (“NAV”) provided by the 2011. See note 26 to the consolidated financial statements for three levels of input which are used to are used to measure fair value of common stocks. administrator of the fund, and are categorized by measure fair value. Common stocks include 64% of Japanese stocks the ability to redeem investments at the measure- and 36% of foreign stocks as of March 31, 2010, ment day. Yen in millions and 51% of Japanese stocks and 49% of foreign The fair values of insurance contracts are March 31, 2010 stocks as of March 31, 2011. measured using contracted amount with accrued Level 1 Level 2 Level 3 Total Quoted market prices for identical securities interest. Equity securities are used to measure fair value of government Other consists of cash equivalents, other Common stocks ¥471,262 ¥ — ¥ — ¥ 471,262 Commingled funds — 237,495 — 237,495 bonds. Government bonds include 25% of private placement investment funds and other 471,262 237,495 — 708,757 Japanese government bonds and 75% of foreign assets. The fair values of other private placement Debt securities government bonds as of March 31, 2010, and investment funds are measured using the NAV Government bonds 79,739 — — 79,739 25% of Japanese government bonds and 75% of provided by the administrator of the fund, and are Commingled funds — 147,345 2,663 150,008 foreign government bonds as of March 31, 2011. categorized by the ability to redeem investments Other 39,231 19,561 928 59,720 at the measurement day. 118,970 166,906 3,591 289,467 Insurance contracts — 97,086 — 97,086 Other 35,774 1,449 46,518 83,741 Total ¥626,006 ¥502,936 ¥50,109 ¥1,179,051

TOYOTA ANNUAL REPORT 2011 94 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

The following tables summarize the changes in Level 3 plan assets measured at fair value for the Postretirement benefits other than pensions are currently unfunded and provided through years ended March 31, 2010 and 2011: and postemployment benefits various insurance companies and health care Toyota’s U.S. subsidiaries provide certain health providers. The costs of these benefits are Yen in millions care and life insurance benefits to eligible retired recognized over the period the employee provides For the year ended March 31, 2010 employees. In addition, Toyota provides benefits credited service to Toyota. Toyota’s obligations Debt securities Other Total to certain former or inactive employees after under these arrangements are not material. Balance at beginning of year ¥ 5,242 ¥45,825 ¥51,067 Actual return on plan assets 818 (2,206) (1,388) employment, but before retirement. These benefits Purchases, sales and settlements (2,233) 3,467 1,234 Other (236) (568) (804) Balance at end of year ¥ 3,591 ¥46,518 ¥50,109 20 Derivative financial instruments: Yen in millions For the year ended March 31, 2011 Toyota employs derivative financial instruments, For the years ended March 31, 2009, 2010 Debt securities Other Total including foreign exchange forward contracts, and 2011, the ineffective portion of Toyota’s fair Balance at beginning of year ¥ 3,591 ¥46,518 ¥50,109 foreign currency options, interest rate swaps, value hedge relationships was not material. For Actual return on plan assets 312 1,908 2,220 interest rate currency swap agreements and fair value hedging relationships, the components Purchases, sales and settlements (2,948) 11,490 8,542 interest rate options to manage its exposure to of each derivative’s gain or loss are included in the Other (209) (1,065) (1,274) Balance at end of year ¥ 746 ¥58,851 ¥59,597 fluctuations in interest rates and foreign currency assessment of hedge effectiveness. exchange rates. Toyota does not use derivatives

U.S. dollars in millions for speculation or trading. Undesignated derivative financial instruments For the year ended March 31, 2011 Toyota uses foreign exchange forward contracts, Debt securities Other Total Fair value hedges foreign currency options, interest rate swaps, Balance at beginning of year $ 43 $560 $603 Toyota enters into interest rate swaps and interest interest rate currency swap agreements, and Actual return on plan assets 4 23 27 rate currency swap agreements mainly to convert interest rate options, to manage its exposure to Purchases, sales and settlements (35) 138 103 its fixed-rate debt to variable-rate debt. Toyota foreign currency exchange rate fluctuations and Other (3) (13) (16) uses interest rate swap agreements in managing interest rate fluctuations from an economic Balance at end of year $ 9 $708 $717 interest rate risk exposure. Interest rate swap perspective, and for which Toyota is unable or has Toyota expects to contribute ¥97,231 million ($1,169 million) to its pension plans in the year ending agreements are executed as either an integral elected not to apply hedge accounting. March 31, 2012. part of specific debt transactions or on a portfolio basis. Toyota uses interest rate currency swap The following pension benefit payments, which reflect expected future service, as appropriate, are agreements to hedge exposure to currency expected to be paid: exchange rate fluctuations on principal and interest payments for borrowings denominated in Years ending March 31, Yen in millions U.S. dollars in millions foreign currencies. Notes and loans payable 2012 ¥ 72,170 $ 868 issued in foreign currencies are hedged by 2013 71,235 857 concurrently executing interest rate currency swap 2014 73,345 882 2015 76,567 921 agreements, which involve the exchange of foreign 2016 79,591 957 currency principal and interest obligations for from 2017 to 2021 442,737 5,324 each functional currency obligations at agreed- Total ¥815,645 $9,809 upon currency exchange and interest rates.

TOYOTA ANNUAL REPORT 2011 95 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

Fair value and gains or losses on derivative financial instruments The following table summarizes the gains and losses on derivative financial instruments and hedged The following table summarizes the fair values of derivative financial instruments as of March 31, 2010 items reported in the consolidated statement of income for the years ended March 31, 2009, 2010 and 2011: and 2011: Yen in millions Yen in millions U.S. dollars in millions For the years ended March 31, March 31, March 31, 2009 2010 2010 2011 2011 Gains or Gains or (losses) on (losses) on Derivative financial instruments designated as hedging instruments derivative Gains or derivative Gains or Interest rate and currency swap agreements financial (losses) on financial (losses) on instruments hedged items instruments hedged items Prepaid expenses and other current assets ¥ 45,567 ¥ 55,794 $ 671 Investments and other assets - Other 94,430 74,528 896 Derivative financial instruments designated as hedging instruments – Fair value hedge Total ¥ 139,997 ¥ 130,322 $ 1,567 Interest rate and currency swap agreements Other current liabilities ¥ (21,786) ¥ (7,410) $ (89) Cost of financing operations ¥(288,553) ¥293,637 ¥138,677 ¥(135,163) Other long-term liabilities (12,045) (1,188) (14) Total ¥ (33,831) ¥ (8,598) $ (103) Interest expense (439) 439 (265) 265 Undesignated derivative financial instruments Undesignated derivative financial instruments Interest rate and currency swap agreements Interest rate and currency swap agreements Cost of financing operations ¥ (72,696) ¥ — ¥ 77,939 ¥ — Prepaid expenses and other current assets ¥ 54,474 ¥ 99,093 $ 1,192 Investments and other assets - Other 168,349 185,272 2,228 Foreign exchange gain (loss), net (3,016) — (2,819) — Total ¥ 222,823 ¥ 284,365 $ 3,420 Foreign exchange forward and option contracts Cost of financing operations 24,183 — (21,841) — Other current liabilities ¥ (38,152) ¥ (64,611) $ (777) Other long-term liabilities (179,765) (132,785) (1,597) Foreign exchange gain (loss), net 174,158 — 60,599 — Total ¥(217,917) ¥(197,396) $(2,374) Foreign exchange forward and option contracts Yen in millions U.S. dollars in millions Prepaid expenses and other current assets ¥ 6,135 ¥ 2,619 $ 32 For the year ended March 31, For the year ended March 31, Investments and other assets - Other 38 — — 2011 2011 Total ¥ 6,173 ¥ 2,619 $ 32 Gains or Gains or Other current liabilities ¥ (20,843) ¥ (14,202) $ (171) (losses) on (losses) on Other long-term liabilities (138) (75) (1) derivative Gains or derivative Gains or financial (losses) on financial (losses) on Total ¥ (20,981) ¥ (14,277) $ (172) instruments hedged items instruments hedged items Derivative financial instruments designated as The following table summarizes the notional amounts of derivative financial instruments as of March hedging instruments – Fair value hedge 31, 2010 and 2011: Interest rate and currency swap agreements Cost of financing operations ¥ 71,491 ¥ (68,741) $ 860 $(827) Yen in millions U.S. dollars in millions Interest expense (166) 166 (2) 2 March 31, March 31, Undesignated derivative financial instruments 2010 2011 2011 Interest rate and currency swap agreements Designated Undesignated Designated Undesignated Designated Undesignated Cost of financing operations ¥ 72,082 ¥ — $ 867 $ — derivative derivative derivative derivative derivative derivative financial financial financial financial financial financial Foreign exchange gain (loss), net (1,393) — (17) — instruments instruments instruments instruments instruments instruments Foreign exchange forward and option contracts Interest rate and currency Cost of financing operations (2,693) — (32) — swap agreements ¥1,168,882 ¥11,868,039 ¥617,472 ¥11,460,275 $7,426 $137,826 Foreign exchange gain (loss), net 110,211 — 1,325 — Foreign exchange forward and option contracts — 1,487,175 — 1,176,955 — 14,155 Total ¥1,168,882 ¥13,355,214 ¥617,472 ¥12,637,230 $7,426 $151,981

TOYOTA ANNUAL REPORT 2011 96 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

Undesignated derivative financial instruments Credit risk related contingent features The estimated fair values of Toyota’s financial instruments, excluding marketable securities and other are used to manage risks of fluctuations in interest Toyota enters into International Swaps and Deriva- securities investments and affiliated companies and derivative financial instruments, are summarized as rates to certain borrowing transactions and in tives Association Master Agreements with follows: foreign currency exchange rates of certain counterparties. These Master Agreements contain Yen in millions currency receivables and payables. Toyota a provision requiring either Toyota or the counter- March 31, 2010 accounts for these derivative financial instruments party to settle the contract or to post assets to the Carrying Estimated fair as economic hedges with changes in the fair other party in the event of a ratings downgrade Asset (Liability) amount value value recorded directly into current period below a specified threshold. Cash and cash equivalents ¥ 1,865,746 ¥ 1,865,746 earnings. The aggregate fair value amount of derivative Time deposits 392,724 392,724 Unrealized gains or (losses) on undesignated financial instruments that contain credit risk related Total finance receivables, net 8,759,826 9,112,527 derivative financial instruments reported in the contingent features that are in a net liability position Other receivables 360,379 360,379 cost of financing operations for the years ended as of March 31, 2011 is ¥27,432 million ($330 Short-term borrowings (3,279,673) (3,279,673) March 31, 2009, 2010 and 2011 were ¥(80,298) million). The aggregate fair value amount of assets Long-term debt including the current portion (9,191,490) (9,297,904) million, ¥71,538 million and ¥93,370 million ($1,123 that are already posted as of March 31, 2011 is million) those reported in foreign exchange gain ¥5,773 million ($69 million). If the ratings of Toyota Yen in millions U.S. dollars in millions (loss), net were ¥(33,578) million, ¥(26,476) million decline below specified thresholds, the maximum March 31, 2011 March 31, 2011 and ¥(240) million ($(3) million), respectively. amount of assets to be posted or for which Toyota Carrying Estimated fair Carrying Estimated fair Asset (Liability) amount value amount value could be required to settle the contracts is ¥27,432 million ($330 million) as of March 31, 2011. Cash and cash equivalents ¥ 2,080,709 ¥ 2,080,709 $ 25,024 $ 25,024 Time deposits 203,874 203,874 2,452 2,452 Total finance receivables, net 8,680,882 8,971,523 104,400 107,896 Other receivables 306,201 306,201 3,682 3,682 21 Other financial instruments: Short-term borrowings (3,179,009) (3,179,009) (38,232) (38,232) Long-term debt including the current portion (9,200,130) (9,274,881) (110,645) (111,544)

Toyota has certain financial instruments, including interest rate instrument, Toyota’s risk is limited to financial assets and liabilities and off-balance the fair value of the instrument. Although Toyota sheet financial instruments which arose in the may be exposed to losses in the event of Cash and cash equivalents, time deposits estimated by discounting expected cash flows to normal course of business. These financial instru- non-performance by counterparties on financial and other receivables present value using the rates at which new loans ments are executed with creditworthy financial instruments, it does not anticipate significant In the normal course of business, substantially all of similar credit quality and maturity would be institutions, and virtually all foreign currency losses due to the nature of its counterparties. cash and cash equivalents, time deposits and made. contracts are denominated in U.S. dollars, euros Counterparties to Toyota’s financial instruments other receivables are highly liquid and are carried and other currencies of major industrialized represent, in general, international financial at amounts which approximate fair value. Short-term borrowings and long-term debt countries. Financial instruments involve, to varying institutions. Additionally, Toyota does not have a The fair values of short-term borrowings and total degrees, market risk as instruments are subject to significant exposure to any individual counter- Finance receivables, net long-term debt including the current portion were price fluctuations, and elements of credit risk in party. Toyota believes that the overall credit risk The carrying value of variable rate finance receiv- estimated based on the discounted amounts of the event a counterparty should default. In the related to its financial instruments is not ables was assumed to approximate fair value as future cash flows using Toyota’s current unlikely event the counterparties fail to meet the significant. they were repriced at prevailing market rates. The incremental borrowing rates for similar liabilities. contractual terms of a foreign currency or an fair value of fixed rate finance receivables was

TOYOTA ANNUAL REPORT 2011 97 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

22 Lease commitments: The minimum rental payments required under operating leases relating primarily to land, buildings and equipment having initial or remaining non-cancelable lease terms in excess of one year at March 31, Toyota leases certain assets under capital lease and operating lease arrangements. 2011 are as follows: An analysis of leased assets under capital leases is as follows: Years ending March 31, Yen in millions U.S. dollars in millions Yen in millions U.S. dollars in millions 2012 ¥ 9,198 $111 March 31, March 31, 2013 7,439 89 Class of property 2010 2011 2011 2014 5,687 68 Building ¥23,518 ¥13,412 $161 2015 4,648 56 Machinery and equipment 48,043 30,283 364 2016 4,061 49 Less - Accumulated depreciation (36,926) (18,590) (223) Thereafter 13,146 158 ¥34,635 ¥25,105 $302 Total minimum future rentals ¥44,179 $531

Amortization expenses under capital leases for the years ended March 31, 2009, 2010 and 2011 were ¥12,183 million, ¥12,606 million and ¥13,341 million ($160 million), respectively.

Future minimum lease payments under capital leases together with the present value of the net 23 Other commitments and contingencies, concentrations and factors that may affect future operations: minimum lease payments as of March 31, 2011 are as follows: Commitments provided as of March 31, 2011. Under these Years ending March 31, Yen in millions U.S. dollars in millions Commitments outstanding at March 31, 2011 for guarantee contracts, Toyota is entitled to recover 2012 ¥ 5,192 $ 62 the purchase of property, plant and equipment any amount paid by Toyota from the customers 2013 3,741 45 and other assets totaled ¥83,506 million ($1,004 whose original obligations Toyota has guaranteed. 2014 2,516 30 million). 2015 2,248 27 Legal Proceedings 2016 1,971 24 Guarantees Product Recalls Thereafter 13,981 168 Toyota enters into contracts with Toyota dealers to From time-to-time, Toyota issues vehicle recalls Total minimum lease payments 29,649 356 guarantee customers’ payments of their install- and takes other safety measures including safety Less - Amount representing interest (7,732) (93) Present value of net minimum lease payments 21,917 263 ment payables that arise from installment campaigns relating to its vehicles. In November Less - Current obligations (4,283) (51) contracts between customers and Toyota dealers, 2009, Toyota announced a safety campaign in Long-term capital lease obligations ¥17,634 $212 as and when requested by Toyota dealers. North America for certain models of Toyota and Guarantee periods are set to match maturity of Lexus vehicles related to floor mat entrapment of Rental expenses under operating leases for the years ended March 31, 2009, 2010 and 2011 were installment payments, and at March 31, 2011, accelerator pedals, and later expanded it to ¥106,653 million, ¥93,994 million and ¥89,029 million ($1,071 million), respectively. range from 1 month to 35 years; however, they include additional models. In January 2010, are generally shorter than the useful lives of Toyota announced a recall in North America for products sold. Toyota is required to execute its certain models of Toyota vehicles related to guarantee primarily when customers are unable sticking and slow-to-return accelerator pedals. to make required payments. Also in January 2010, Toyota recalled in Europe The maximum potential amount of future and China certain models of Toyota vehicles payments as of March 31, 2011 is ¥1,662,225 related to sticking accelerator pedals. In February million ($19,991 million). Liabilities for guarantees 2010, Toyota announced a worldwide recall totaling ¥20,450 million ($246 million) have been related to the software program that controls the

TOYOTA ANNUAL REPORT 2011 98 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

antilock braking system (ABS) in certain vehicles Additionally, there are approximately ten a number of vehicle models. Plaintiffs seek Commission (“SEC”). The subpoenas and the models including the Prius. Set forth below is a putative class actions in various state courts, monetary damages in an amount to be proven at voluntary request primarily seek documents description of various claims, lawsuits and including California. The claims are similar to the trial, interest and attorneys’ fees and costs. related to unintended acceleration and certain government investigations involving Toyota in the class actions in federal court. One of the putative On May 21, 2010, a shareholder derivative financial records. This is a coordinated investiga- United States relating to these recalls and other California class actions was filed by the Orange action was filed against certain officers and tion and has included interviews of Toyota and safety measures. County District Attorney and, among other things, directors of Toyota in the Superior Court of the non-Toyota witnesses, as well as production of seeks statutory penalties alleging that Toyota sold State of California, County of Los Angeles. The documents. In June 2010, Toyota received a Class Action and Consolidated Litigation and marketed defective vehicles and that complaint alleged that the defendants breached second voluntary request and subpoena from the There are approximately 200 putative class consumers have been harmed as a result of their fiduciary duties of care and loyalty in their SEC and a subpoena from the U.S. Attorney for actions that have been filed since November diminution in value of their vehicles. handling of design defects in Toyota vehicles, the Southern District of New York. The subpoenas 2009 alleging that certain Toyota, Lexus and Beginning in February 2010, Toyota has also alleging facts similar to those alleged in the and the voluntary request primarily seek produc- Scion vehicles contain defects that lead to been sued in approximately 20 putative class securities class action. On April 20, 2011, the tion of documents related to the recalls of the unintended acceleration. Many of the putative actions alleging defects in the antilock braking Court issued an order dismissing the case and steering relay rod. class actions allege that malfunctions involving systems in various hybrid vehicles that cause the entered judgment in favor of defendants. During the first two quarters of calendar year the floor mats and accelerator pedals do not vehicles to fail to stop in a timely manner when On July 22, 2010, Toyota was sued in the 2010, Toyota received four inquires from the cover the full scope of possible defects related to driving in certain road conditions. The plaintiffs Superior Court of the State of California, County National Highway Traffic Safety Administration unintended acceleration. Rather, they allege that seek an order requiring Toyota to repair the of Los Angeles in a putative bondholder class (“NHTSA”). The first two, TQ10-001 and TQ10-002, Electronic Throttle Control System-intelligent vehicles and claim that all owners and lessees of action filed on behalf of purchasers of Toyota and address the timing of the announcement of the (ETCS-i) is the true cause and that Toyota has vehicles, including those for which recalls have Toyota Motor Credit Corporation bonds traded on recalls related to floor mat entrapment and failed to inform consumers despite its awareness been implemented, should be compensated for foreign securities exchanges. The complaint sticking accelerator pedals, respectively. The of the problem. In general, these cases seek the defects related to the antilock braking systems. alleges violations of California securities law, third, RQ10-003, addresses the scope of the recovery for the alleged diminution in value of the These cases have been consolidated into two fraud, breach of fiduciary duty, and other state recalls and unintended acceleration generally. vehicles, injunctive and other relief. In April 2010, actions, one in federal court in the United States law claims. On September 15, 2010, Toyota On April 19, 2010, Toyota and NHTSA announced the approximately 190 federal cases were consol- District Court for the Central District of California removed the putative bondholder class action to a settlement resolving TQ10-002 pursuant to idated for pretrial proceedings into a single and one in state court in the Los Angeles County the United States District Court for the Central which Toyota paid $16.4 million to the U.S. multi-district litigation in the United States District Superior Court. District of California. On January 10, 2011, the Treasury. Toyota denied the allegations that it Court for the Central District of California. In From February through April 2010, Toyota District Court issued an order dismissing the case violated the Motor Vehicle Safety Act or its addition, of the approximately 325 individual was also sued in six putative shareholder class with prejudice, and entered judgment in favor of implementing regulations but agreed to the settle- product liability personal injury cases relating to actions on behalf of investors in Toyota American defendants. Plaintiff has filed a notice of appeal to ment to avoid a protracted dispute and to unintended acceleration pending against Toyota, Depository Shares and common stock. The cases the United States Circuit Court of Appeals for the concentrate on regaining customer confidence. the federal cases have been or are likely to be have been consolidated into a single action in the Ninth Circuit. On May 10, 2010, Toyota received an inquiry consolidated into the multi-district litigation. The United States District Court for the Central District Toyota believes that it has meritorious from NHTSA on the timing of its announcement of remaining individual product liability personal of California, and a lead plaintiff has been defenses to all of the cases and will vigorously the 2005 recall of certain pickup trucks and sport injury cases relating to unintended acceleration appointed. The consolidated complaint, filed defend against them. utility vehicles for a possible issue with the steering remain pending in various state courts in the October 4, 2010, alleges violations of the Securi- relay rod (TQ10-004). On December 20, 2010, United States. This consolidated federal action ties Exchange Act of 1934 and Japan’s Financial Government Investigations Toyota and NHTSA announced that they had suit is in its early stages and has included Instruments and Exchange Act on the basis that In February 2010, Toyota received a subpoena reached a settlement with respect to TQ10-001 document production, depositions and various defendants made statements that were false or from the U.S. Attorney for the Southern District of and TQ10-004 pursuant to which Toyota paid motions. misleading in that they failed to disclose problems New York and a voluntary request and subpoena approximately $32.4 million in the aggregate to with, or the causes of, unintended acceleration in from the U.S. Securities and Exchange the U.S. Treasury. As in the April 2010 settlement

TOYOTA ANNUAL REPORT 2011 99 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

resolving TQ10-002, Toyota denied that it violated on behalf of all purchasers of new motor vehicles loss, if any, beyond the amounts accrued, with manufacturers, distributors and other auto-related the Motor Vehicle Safety Act or its implementing who purchased their vehicles in the United States respect to these claims. However, based upon economic operators establish adequate used regulations but agreed to the settlement to avoid on or after January 1, 2001. As of April 1, 2005, information currently available to Toyota, Toyota vehicle collection and treatment facilities and to a protracted dispute and to concentrate on the federal lawsuits were consolidated in the State believes that its losses from these matters, if any, ensure that hazardous materials and recyclable regaining customer confidence. In addition, on of Maine, and lawsuits in the State of California would not have a material adverse effect on parts are removed from vehicles prior to March 1, 2011, RQ10-003 was officially resolved. and the State of New Jersey were also consoli- Toyota’s financial position, results of operations or shredding. This directive impacts Toyota’s Toyota has also received subpoenas and dated within the respective states. Lawsuits in the cash flows. vehicles sold in the European Union and Toyota is formal and informal requests from various states’ state courts have been stayed until the federal introducing vehicles that are in compliance with attorneys general, including the Executive lawsuits proceed. Environmental Matters and Others such measures taken by the member states Committee for a group of 28 states’ attorney The complaints allege that the defendants In October 2000, the European Union brought pursuant to the directive. general, and certain local governmental agencies violated the Sherman Antitrust Act or state into effect a directive that requires member states Based on the legislation that has been regarding various recalls, the facts underlying its anti-trust law by conspiring among themselves to promulgate regulations implementing the enacted to date, Toyota has provided for its recent recalls and customer handling related to and with their dealers to prevent the sale to United following: (i) manufacturers shall bear all or a estimated liability related to covered vehicles in those recalls. States citizens of vehicles produced for the significant part of the costs for taking back existence as of March 31, 2011. Depending on Toyota is cooperating with the government Canadian market, resulting in higher prices to end-of-life vehicles put on the market after July 1, the legislation that will be enacted subject to other agencies in their investigations, which, except as United States consumers. Toyota believes that its 2002 and dismantling and recycling those circumstances, Toyota may be required to revise noted above, are on-going. actions have been lawful. In the interest of vehicles. Beginning January 1, 2007, this require- the accruals for the expected costs. Although The recalls and other safety measures resolving these legal actions, however, Toyota ment became applicable to vehicles put on the Toyota does not expect its compliance with the described above have led to a number of claims, entered into a settlement agreement with the market before July 1, 2002; (ii) manufacturers directive to result in significant cash expenditures, lawsuits and government investigations against plaintiffs in February 2006. The settlement may not use certain hazardous materials in Toyota is continuing to assess the impact of this Toyota in the United States as set forth in the agreement remains subject to court approval. In vehicles to be sold after July 2003; (iii) vehicles future legislation on its results of operations, cash preceding paragraphs. Amounts accrued as of the meantime, the federal court granted summary type-approved and put on the market after flows and financial position. March 31, 2011 related to these legal proceed- judgment in favor of the remaining defendants December 15, 2008, shall be re-usable and/or Toyota purchases materials that are equiva- ings and governmental investigations are not and the time to appeal has lapsed. Current activity recyclable to a minimum of 85% by weight per lent to approximately 10% of material costs from a material to Toyota’s financial position, results of is centered in the California state courts, although vehicle and shall be re-usable and/or recoverable supplier which is an affiliated company. operations, or cash flow. Toyota cannot currently that action is stayed against Toyota pending a to a minimum of 95% by weight per vehicle; and The parent company has a concentration of estimate its potential liability, damages or range ruling on the pending Toyota settlement. In (iv) end-of-life vehicles must meet actual re-use of labor supply in employees working under collec- of potential loss, if any, beyond the amounts February 2011, the federal court held a hearing 80% and re-use as material or energy of 85%, tive bargaining agreements and a substantial accrued; however, the resolution of these matters with respect to approval of Toyota’s settlement respectively, of vehicle weight by 2006, rising portion of these employees are working under the could have an adverse effect on Toyota’s financial agreement. If final approval is granted, that respectively to 85% and 95% by 2015. A law to agreement that will expire on December 31, 2011. position, results of operations or cash flows. approval should resolve this matter for Toyota. implement the directive came into effect in all member states including Bulgaria, Romania that United States Antitrust Proceedings Other Proceedings joined the European Union in January 2007. In February 2003, Toyota, GM, Ford, DaimlerChrysler, Toyota has various other legal actions, other Currently, there are uncertainties surrounding the Honda, Nissan, BMW and their sales subsidiaries governmental proceedings and other claims implementation of the applicable regulations in in the United States and Canada, as well as the pending against it, including other product liability different European Union member states, particu- National Automobile Dealers Association and the claims in the United States. Although the claimants larly regarding manufacturer responsibilities and Canadian Automobile Dealers Association were in some of these actions seek potentially substan- resultant expenses that may be incurred. named as defendants in approximately 85 tial damages, Toyota cannot currently estimate its In addition, under this directive member purported federal and state class action lawsuits potential liability, damages or range of potential states must take measures to ensure that car

TOYOTA ANNUAL REPORT 2011 100 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

24 Segment data: As of and for the year ended March 31, 2010: Yen in millions The operating segments reported below are the consists primarily of financing, and vehicle and Inter-segment Financial Elimination/ segments of Toyota for which separate financial equipment leasing operations to assist in the Automotive Services All Other Unallocated Amount Consolidated information is available and for which operating merchandising of the parent company and its Net revenues income/loss amounts are evaluated regularly by affiliate companies products as well as other Sales to external customers ¥17,187,308 ¥ 1,226,244 ¥ 537,421 ¥ — ¥18,950,973 executive management in deciding how to allocate products. The All Other segment includes the Inter-segment sales and transfers 10,120 19,163 410,194 (439,477) — resources and in assessing performance. design, manufacturing and sales of housing, Total 17,197,428 1,245,407 947,615 (439,477) 18,950,973 The major portions of Toyota’s operations on telecommunications and other business. Operating expenses 17,283,798 998,480 956,475 (435,296) 18,803,457 Operating income (loss) ¥ (86,370) ¥ 246,927 ¥ (8,860) ¥ (4,181) ¥ 147,516 a worldwide basis are derived from the Automo- The following tables present certain informa- Assets ¥12,359,404 ¥13,274,953 ¥1,119,635 ¥3,595,295 ¥30,349,287 tive and Financial Services business segments. tion regarding Toyota’s industry segments and Investment in equity method investees 1,692,702 129,745 — 44,993 1,867,440 The Automotive segment designs, manufactures operations by geographic areas and overseas Depreciation expense 1,018,935 348,820 46,814 — 1,414,569 and distributes sedans, minivans, compact cars, revenues by destination as of and for the years Capital expenditure 616,216 774,102 21,751 25,532 1,437,601 sport-utility vehicles, trucks and related parts and ended March 31, 2009, 2010 and 2011. accessories. The Financial Services segment As of and for the year ended March 31, 2011:

Yen in millions Inter-segment Segment operating results and assets Financial Elimination/ Automotive Services All Other Unallocated Amount Consolidated As of and for the year ended March 31, 2009: Net revenues Yen in millions Sales to external customers ¥17,322,753 ¥ 1,173,168 ¥ 497,767 ¥ — ¥18,993,688 Inter-segment Inter-segment sales and transfers 14,567 19,037 474,485 (508,089) — Financial Elimination/ Total 17,337,320 1,192,205 972,252 (508,089) 18,993,688 Automotive Services All Other Unallocated Amount Consolidated Operating expenses 17,251,347 833,925 937,010 (496,873) 18,525,409 Net revenues Operating income (loss) ¥ 85,973 ¥ 358,280 ¥ 35,242 ¥ (11,216) ¥ 468,279 Sales to external customers ¥18,550,501 ¥ 1,355,850 ¥ 623,219 ¥ — ¥20,529,570 Assets ¥11,341,558 ¥13,365,394 ¥1,146,720 ¥3,964,494 ¥29,818,166 Inter-segment sales and transfers 14,222 21,698 561,728 (597,648) — Investment in equity method investees 1,784,539 3,519 3,045 26,885 1,817,988 Total 18,564,723 1,377,548 1,184,947 (597,648) 20,529,570 Depreciation expense 819,075 330,865 25,633 — 1,175,573 Operating expenses 18,959,599 1,449,495 1,175,034 (593,547) 20,990,581 Capital expenditure 691,867 991,330 21,058 (13,064) 1,691,191 Operating income (loss) ¥ (394,876) ¥ (71,947) ¥ 9,913 ¥ (4,101) ¥ (461,011) Assets ¥11,716,316 ¥13,631,662 ¥1,131,400 ¥2,582,659 ¥29,062,037 U.S. dollars in millions Investment in equity method investees 1,606,013 168,057 — 36,036 1,810,106 Inter-segment Financial Elimination/ Depreciation expense 1,072,848 389,937 32,385 — 1,495,170 Automotive Services All Other Unallocated Amount Consolidated Capital expenditure 1,343,572 883,968 35,334 62,023 2,324,897 Net revenues Sales to external customers $208,331 $ 14,109 $ 5,987 $ — $228,427 Inter-segment sales and transfers 176 229 5,706 (6,111) — Total 208,507 14,338 11,693 (6,111) 228,427 Operating expenses 207,473 10,029 11,269 (5,976) 222,795 Operating income (loss) $ 1,034 $ 4,309 $ 424 $ (135) $ 5,632 Assets $136,399 $160,738 $13,791 $47,679 $358,607 Investment in equity method investees 21,462 42 37 323 21,864 Depreciation expense 9,851 3,979 308 — 14,138 Capital expenditure 8,321 11,922 253 (157) 20,339

TOYOTA ANNUAL REPORT 2011 101 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

Geographic Information U.S. dollars in millions As of and for the year ended March 31, 2009: Inter-segment Elimination/ Yen in millions North Unallocated Japan America Europe Asia Other Amount Consolidated Inter-segment Elimination/ Net revenues North Unallocated Japan America Europe Asia Other Amount Consolidated Sales to external customers $ 83,787 $ 64,075 $23,096 $37,740 $19,729 $ — $228,427 Inter-segment sales and transfers 48,339 1,218 734 2,844 2,028 (55,163) — Net revenues Total 132,126 65,293 23,830 40,584 21,757 (55,163) 228,427 Sales to external customers ¥ 7,471,916 ¥ 6,097,676 ¥2,889,753 ¥2,450,412 ¥1,619,813 ¥ — ¥20,529,570 Operating expenses 136,484 61,210 23,672 36,820 19,831 (55,222) 222,795 Inter-segment sales and transfers 4,714,821 125,238 123,375 268,917 263,087 (5,495,438) — Operating income (loss) $ (4,358) $ 4,083 $ 158 $ 3,764 $ 1,926 $ 59 $ 5,632 Total 12,186,737 6,222,914 3,013,128 2,719,329 1,882,900 (5,495,438) 20,529,570 Assets $135,729 $ 119,192 $23,226 $25,719 $24,587 $ 30,154 $358,607 Operating expenses 12,424,268 6,613,106 3,156,361 2,543,269 1,795,252 (5,541,675) 20,990,581 Operating income (loss) ¥ (237,531) ¥ (390,192) ¥ (143,233) ¥ 176,060 ¥ 87,648 ¥ 46,237 ¥ (461,011) Long-lived assets 37,559 27,376 3,676 4,141 3,125 — 75,877 Assets ¥11,956,431 ¥10,685,466 ¥2,324,528 ¥1,547,890 ¥1,446,505 ¥ 1,101,217 ¥29,062,037 “Other” consists of Central and South America, Oceania and Africa. Long-lived assets 3,658,719 2,726,419 410,185 372,330 234,028 — 7,401,681

As of and for the year ended March 31, 2010: Revenues are attributed to geographies and marketable securities. Such corporate assets based on the country location of the parent were ¥3,225,901 million, ¥4,205,402 million and Yen in millions company or the subsidiary that transacted the ¥4,613,672 million ($55,486 million), as of March Inter-segment Elimination/ sale with the external customer. 31, 2009, 2010 and 2011, respectively. North Unallocated There are no any individually material countries Transfers between industries or geographic Japan America Europe Asia Other Amount Consolidated with respect to revenues, operating expenses, segments are made at amounts which Toyota’s Net revenues operating income, assets and long-lived assets management believes approximate arm’s-length Sales to external customers ¥ 7,314,813 ¥ 5,583,228 ¥2,082,671 ¥2,431,648 ¥1,538,613 ¥ — ¥18,950,973 included in other foreign countries. transactions. In measuring the reportable Inter-segment sales and transfers 3,905,490 87,298 64,378 223,679 135,248 (4,416,093) — Total 11,220,303 5,670,526 2,147,049 2,655,327 1,673,861 (4,416,093) 18,950,973 Unallocated amounts included in assets segments’ income or losses, operating income Operating expenses 11,445,545 5,585,036 2,180,004 2,451,800 1,558,287 (4,417,215) 18,803,457 represent assets held for corporate purposes, consists of revenue less operating expenses. Operating income (loss) ¥ (225,242) ¥ 85,490 ¥ (32,955) ¥ 203,527 ¥ 115,574 ¥ 1,122 ¥ 147,516 which mainly consist of cash and cash equivalents Assets ¥12,465,677 ¥10,223,903 ¥2,060,962 ¥1,925,126 ¥1,803,703 ¥ 1,869,916 ¥30,349,287 Long-lived assets 3,347,896 2,401,172 351,037 361,296 249,500 — 6,710,901 Overseas Revenues by destination As of and for the year ended March 31, 2011: The following information shows revenues that are U.S.GAAP, Toyota discloses this information in Yen in millions attributed to countries based on location of order to provide financial statement users with Inter-segment customers, excluding customers in Japan. In valuable information. Elimination/ North Unallocated addition to the disclosure requirements under Japan America Europe Asia Other Amount Consolidated Net revenues Yen in millions U.S. dollars in millions Sales to external customers ¥ 6,966,929 ¥5,327,809 ¥1,920,416 ¥3,138,112 ¥1,640,422 ¥ — ¥18,993,688 For the years ended For the year ended March 31, March 31, Inter-segment sales and transfers 4,019,317 101,327 61,081 236,422 168,694 (4,586,841) — 2009 2010 2011 2011 Total 10,986,246 5,429,136 1,981,497 3,374,534 1,809,116 (4,586,841) 18,993,688 North America ¥6,294,230 ¥5,718,381 ¥5,398,278 $64,922 Operating expenses 11,348,642 5,089,633 1,968,349 3,061,557 1,648,987 (4,591,759) 18,525,409 Operating income (loss) ¥ (362,396) ¥ 339,503 ¥ 13,148 ¥ 312,977 ¥ 160,129 ¥ 4,918 ¥ 468,279 Europe 2,861,351 2,023,280 1,793,932 21,575 Asia 2,530,352 2,641,471 3,280,384 39,451 Assets ¥11,285,864 ¥9,910,828 ¥1,931,231 ¥2,138,499 ¥2,044,379 ¥ 2,507,365 ¥29,818,166 Other 3,421,881 2,838,671 3,196,114 38,438 Long-lived assets 3,123,042 2,276,332 305,627 344,304 259,855 — 6,309,160 “Other” consists of Central and South America, Oceania, Africa and the Middle East, etc.

TOYOTA ANNUAL REPORT 2011 102 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

Certain financial statement data on non-financial services and financial services businesses Yen in millions U.S. dollars in millions The financial data below presents separately Toyota’s non-financial services and financial services March 31, March 31, businesses. 2010 2011 2011 Non-Financial Services Businesses Yen in millions U.S. dollars in millions Current liabilities March 31, March 31, Short-term borrowings ¥ 575,890 ¥ 478,646 $ 5,756 2010 2011 2011 Current portion of long-term debt 289,447 243,817 2,932 Non-Financial Services Businesses Accounts payable 1,954,147 1,497,253 18,007 Current assets Accrued expenses 1,627,228 1,666,748 20,045 Cash and cash equivalents ¥ 1,338,821 ¥ 1,300,553 $ 15,641 Income taxes payable 140,210 104,392 1,256 Marketable securities 1,783,629 1,036,555 12,466 Other current liabilities 931,727 1,024,662 12,323 Trade accounts and notes receivable, less allowance for doubtful accounts 1,908,884 1,483,551 17,842 Total current liabilities 5,518,649 5,015,518 60,319 Inventories 1,422,373 1,304,128 15,684 Long-term liabilities Prepaid expenses and other current assets 1,793,622 1,383,616 16,640 Long-term debt 1,095,270 839,611 10,097 Total current assets 8,247,329 6,508,403 78,273 Accrued pension and severance costs 672,905 660,918 7,949 Investments and other assets 4,549,658 5,825,966 70,065 Other long-term liabilities 604,903 554,402 6,667 Property, plant and equipment 4,996,321 4,608,309 55,422 Total long-term liabilities 2,373,078 2,054,931 24,713 Total Non-Financial Services Businesses assets 17,793,308 16,942,678 203,760 Total Non-Financial Services Businesses liabilities 7,891,727 7,070,449 85,032 Financial Services Businesses Financial Services Businesses Current assets Current liabilities Cash and cash equivalents 526,925 780,156 9,383 Short-term borrowings 3,118,938 2,986,700 35,919 Marketable securities 9,536 188,880 2,272 Current portion of long-term debt 1,968,908 2,541,479 30,565 Finance receivables, net 4,209,496 4,136,805 49,751 Accounts payable 13,063 19,472 234 Prepaid expenses and other current assets 653,798 636,249 7,651 Accrued expenses 113,559 110,348 1,327 Total current assets 5,399,755 5,742,090 69,057 Income taxes payable 13,177 9,555 115 Noncurrent finance receivables, net 5,630,680 5,556,746 66,828 Other current liabilities 519,011 538,026 6,471 Investments and other assets 529,938 365,707 4,398 Total current liabilities 5,746,656 6,205,580 74,631 Property, plant and equipment 1,714,580 1,700,851 20,455 Long-term liabilities Total Financial Services Businesses assets 13,274,953 13,365,394 160,738 Long-term debt 6,060,349 5,669,456 68,184 Eliminations (718,974) (489,906) (5,891) Accrued pension and severance costs 5,772 7,104 85 Total assets ¥30,349,287 ¥29,818,166 $358,607 Other long-term liabilities 433,641 435,508 5,238 Total long-term liabilities 6,499,762 6,112,068 73,507 Assets in the non-financial services include unallocated corporate assets. Total Financial Services Businesses liabilities 12,246,418 12,317,648 148,138 Eliminations (719,301) (489,955) (5,892) Total liabilities 19,418,844 18,898,142 227,278 Total Toyota Motor Corporation shareholders’ equity 10,359,723 10,332,371 124,262 Noncontrolling interest 570,720 587,653 7,067 Total shareholders’ equity 10,930,443 10,920,024 131,329 Total liabilities and shareholders’ equity ¥30,349,287 ¥29,818,166 $358,607

TOYOTA ANNUAL REPORT 2011 103 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

Statements of income

Yen in millions U.S. dollars in millions March 31, March 31, 2009 2010 2011 2011 Non-Financial Services Businesses Net revenues ¥19,182,161 ¥17,732,143 ¥17,826,986 $214,395 Costs and expenses Cost of revenues 17,470,791 15,973,442 15,986,741 192,264 Selling, general and administrative 2,097,674 1,854,710 1,723,071 20,722 Total costs and expenses 19,568,465 17,828,152 17,709,812 212,986 Operating income (loss) (386,304) (96,009) 117,174 1,409 Other income (expense), net (71,925) 144,625 88,840 1,069 Income (loss) before income taxes and equity in earnings of affiliated companies (458,229) 48,616 206,014 2,478 Provision for income taxes (10,152) 42,342 178,795 2,150 Equity in earnings of affiliated companies 53,226 109,944 214,229 2,576 Net income (loss) (394,851) 116,218 241,448 2,904 Less: Net (income) loss attributable to the noncontrolling interest 26,282 (32,103) (54,055) (650) Net income (loss) attributable to Toyota Motor Corporation- Non-Financial Services Businesses (368,569) 84,115 187,393 2,254 Financial Services Businesses Net revenues 1,377,548 1,245,407 1,192,205 14,338 Costs and expenses Cost of revenues 994,191 716,997 636,374 7,653 Selling, general and administrative 455,304 281,483 197,551 2,376 Total costs and expenses 1,449,495 998,480 833,925 10,029 Operating income (loss) (71,947) 246,927 358,280 4,309 Other income (expense), net (30,233) (3,923) 1,349 16 Income (loss) before income taxes and equity in earnings of affiliated companies (102,180) 243,004 359,629 4,325 Provision for income taxes (46,298) 50,362 134,094 1,613 Equity in earnings (losses) of affiliated companies (10,502) (64,536) 787 10 Net income (loss) (66,384) 128,106 226,322 2,722 Less: Net income attributable to the noncontrolling interest (2,004) (2,653) (3,251) (39) Net income (loss) attributable to Toyota Motor (68,388) 125,453 223,071 2,683 Corporation- Financial Services Businesses Eliminations 20 (112) (2,281) (28) Net income (loss) attributable to Toyota Motor Corporation ¥ (436,937) ¥ 209,456 ¥ 408,183 $ 4,909

TOYOTA ANNUAL REPORT 2011 104 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

Statements of cash flows

Yen in millions Yen in millions For the year ended March 31, 2009 For the year ended March 31, 2010 Non-Financial Financial Services Non-Financial Financial Services Services Businesses Businesses Consolidated Services Businesses Businesses Consolidated Cash flows from operating activities Net income (loss) ¥ (394,851) ¥ (66,384) ¥ (461,215) ¥ 116,218 ¥ 128,106 ¥ 244,212 Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation 1,105,233 389,937 1,495,170 1,065,749 348,820 1,414,569 Provision for doubtful accounts and credit losses (1,663) 259,096 257,433 1,905 98,870 100,775 Pension and severance costs, less payments (21,428) 470 (20,958) 55 1,199 1,254 Losses on disposal of fixed assets 68,546 136 68,682 46,661 276 46,937 Unrealized losses on available-for-sale securities, net 220,920 — 220,920 2,486 — 2,486 Deferred income taxes (132,127) (62,871) (194,990) (14,183) 39,759 25,537 Equity in (earnings) losses of affiliated companies (53,226) 10,502 (42,724) (109,944) 64,536 (45,408) Changes in operating assets and liabilities, and other (223,101) 186,234 154,587 733,338 133,275 768,168 Net cash provided by operating activities 568,303 717,120 1,476,905 1,842,285 814,841 2,558,530 Cash flows from investing activities Additions to finance receivables — (14,230,272) (8,612,111) — (13,492,119) (7,806,201) Collection of and proceeds from sales of finance receivables — 13,959,045 8,155,094 — 13,107,531 7,517,968 Additions to fixed assets excluding equipment leased to others (1,358,518) (6,064) (1,364,582) (599,154) (5,382) (604,536) Additions to equipment leased to others (82,411) (877,904) (960,315) (64,345) (768,720) (833,065) Proceeds from sales of fixed assets excluding equipment leased to others 41,285 6,101 47,386 46,070 6,403 52,473 Proceeds from sales of equipment leased to others 55,896 472,853 528,749 36,668 428,424 465,092 Purchases of marketable securities and security investments (418,342) (217,688) (636,030) (2,310,912) (101,270) (2,412,182) Proceeds from sales of and maturity of marketable securities and security investments 1,295,561 180,316 1,475,877 1,012,781 95,960 1,108,741 Payment for additional investments in affiliated companies, net of cash acquired (45) — (45) (1,020) — (1,020) Changes in investments and other assets, and other 129,834 (2,091) 135,757 (259,089) 102,497 (337,454) Net cash used in investing activities (336,740) (715,704) (1,230,220) (2,139,001) (626,676) (2,850,184) Cash flows from financing activities Proceeds from issuance of long-term debt 545,981 3,030,029 3,506,990 492,300 2,733,465 3,178,310 Payments of long-term debt (150,097) (2,580,637) (2,704,078) (77,033) (2,926,308) (2,938,202) Increase (decrease) in short-term borrowings 138,387 239,462 406,507 (249,238) (251,544) (335,363) Dividends paid (439,991) — (439,991) (172,476) — (172,476) Purchase of common stock, and other (70,587) — (70,587) (10,251) — (10,251) Net cash provided by (used in) financing activities 23,693 688,854 698,841 (16,698) (444,387) (277,982) Effect of exchange rate changes on cash and cash equivalents (80,214) (49,579) (129,793) 4,092 (12,990) (8,898) Net increase (decrease) in cash and cash equivalents 175,042 640,691 815,733 (309,322) (269,212) (578,534) Cash and cash equivalents at beginning of year 1,473,101 155,446 1,628,547 1,648,143 796,137 2,444,280 Cash and cash equivalents at end of year ¥ 1,648,143 ¥ 796,137 ¥ 2,444,280 ¥ 1,338,821 ¥ 526,925 ¥ 1,865,746

TOYOTA ANNUAL REPORT 2011 105 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

Statements of cash flows

Yen in millions U.S. dollars in millions For the year ended March 31, 2011 For the year ended March 31, 2011 Non-Financial Financial Services Non-Financial Financial Services Services Businesses Businesses Consolidated Services Businesses Businesses Consolidated Cash flows from operating activities Net income ¥ 241,448 ¥ 226,322 ¥ 465,485 $ 2,904 $ 2,722 $ 5,598 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 844,708 330,865 1,175,573 10,159 3,979 14,138 Provision for doubtful accounts and credit losses 1,806 2,334 4,140 22 28 50 Pension and severance costs, less payments (24,867) 1,453 (23,414) (299) 17 (282) Losses on disposal of fixed assets 36,076 138 36,214 434 2 436 Unrealized losses on available-for-sale securities, net 7,915 — 7,915 95 — 95 Deferred income taxes (17,258) 103,035 85,710 (208) 1,239 1,031 Equity in earnings of affiliated companies (214,229) (787) (215,016) (2,576) (10) (2,586) Changes in operating assets and liabilities, and other 591,378 (106,416) 487,402 7,112 (1,279) 5,862 Net cash provided by operating activities 1,466,977 556,944 2,024,009 17,643 6,698 24,342 Cash flows from investing activities Additions to finance receivables — (14,323,261) (8,438,785) — (172,258) (101,488) Collection of and proceeds from sales of finance receivables — 13,887,751 8,003,940 — 167,020 96,259 Additions to fixed assets excluding equipment leased to others (621,302) (8,024) (629,326) (7,472) (97) (7,569) Additions to equipment leased to others (78,559) (983,306) (1,061,865) (945) (11,825) (12,770) Proceeds from sales of fixed assets excluding equipment leased to others 50,742 600 51,342 611 7 618 Proceeds from sales of equipment leased to others 17,700 468,995 486,695 213 5,640 5,853 Purchases of marketable securities and security investments (4,063,499) (358,308) (4,421,807) (48,870) (4,309) (53,179) Proceeds from sales of and maturity of marketable securities and security investments 3,423,618 292,538 3,716,156 41,174 3,518 44,692 Payment for additional investments in affiliated companies, net of cash acquired (299) — (299) (4) — (4) Changes in investments and other assets, and other 394,479 18,303 177,605 4,744 221 2,136 Net cash used in investing activities (877,120) (1,004,712) (2,116,344) (10,549) (12,083) (25,452) Cash flows from financing activities Proceeds from issuance of long-term debt 15,318 2,934,588 2,931,436 184 35,293 35,255 Payments of long-term debt (309,862) (2,306,139) (2,489,632) (3,727) (27,735) (29,942) Increase (decrease) in short-term borrowings (86,884) 122,619 162,260 (1,045) 1,475 1,951 Dividends paid (141,120) — (141,120) (1,697) — (1,697) Purchase of common stock, and other (28,617) — (28,617) (344) — (344) Net cash provided by (used in) financing activities (551,165) 751,068 434,327 (6,629) 9,033 5,223 Effect of exchange rate changes on cash and cash equivalents (76,960) (50,069) (127,029) (926) (602) (1,528) Net increase (decrease) in cash and cash equivalents (38,268) 253,231 214,963 (461) 3,046 2,585 Cash and cash equivalents at beginning of year 1,338,821 526,925 1,865,746 16,102 6,337 22,439 Cash and cash equivalents at end of year ¥ 1,300,553 ¥ 780,156 ¥ 2,080,709 $ 15,641 $ 9,383 $ 25,024

TOYOTA ANNUAL REPORT 2011 106 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

25 Per share amounts: The following table shows Toyota Motor Corporation shareholders’ equity per share as of March 31, 2010 and 2011. Toyota Motor Corporation shareholders’ equity per share amounts are calculated by Reconciliations of the differences between basic and diluted net income (loss) attributable to Toyota Motor dividing Toyota Motor Corporation shareholders’ equities’ amount at the end of each period by the number Corporation per share for the years ended March 31, 2009, 2010 and 2011 are as follows: of shares issued and outstanding, excluding treasury stock at the end of the corresponding period.

Yen in millions Thousands of shares Yen U.S. dollars in millions U.S. dollars Yen in millions Thousands of shares Yen U.S. dollars in millions U.S. dollars Net income (loss) Net income Shares issued Net income (loss) attributable to Net income attributable to Toyota Motor and outstanding Toyota Motor Toyota Motor Toyota Motor attributable to Toyota Motor attributable to Toyota Motor Corporation at the end of the Corporation Corporation Corporation Toyota Motor Weighted-average Corporation per Toyota Motor Corporation per Shareholders’ year (excluding Shareholders’ Shareholders’ Shareholders’ Corporation shares share Corporation share equity treasury stock) equity per share equity equity per share For the year ended March 31, 2009 As of March 31, 2010 ¥10,359,723 ¥3,135,995 ¥3,303.49 Basic net loss attributable to Toyota As of March 31, 2011 10,332,371 3,135,699 3,295.08 $124,262 $39.63 Motor Corporation per common share ¥(436,937) 3,140,417 ¥(139.13) Effect of dilutive securities Assumed exercise of dilutive stock options (0) ― Diluted net loss attributable to Toyota Motor Corporation per common share ¥(436,937) 3,140,417 ¥(139.13) 26 Fair value measurements: For the year ended March 31, 2010 Basic net income attributable to Toyota Motor Corporation per common share ¥ 209,456 3,135,986 ¥ 66.79 In accordance with U.S.GAAP, Toyota classifies fair value into three levels of input as follows which are Effect of dilutive securities used to measure it. Assumed exercise of dilutive stock options ― 12 Level 1: Quoted prices in active markets for identical assets or liabilities Diluted net income attributable to Toyota Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or Motor Corporation per common share ¥ 209,456 3,135,998 ¥ 66.79 similar assets or liabilities in markets that are not active; inputs other than quoted prices that For the year ended March 31, 2011 are observable for the assets or liabilities Basic net income attributable to Toyota Motor Corporation per common share ¥ 408,183 3,135,881 ¥ 130.17 $4,909 $1.57 Level 3: Unobservable inputs for assets or liabilities Effect of dilutive securities Assumed exercise of dilutive stock options (0) 34 (0) The following table summarizes the fair values of the assets and liabilities measured at fair value on Diluted net income attributable to Toyota Motor Corporation per common share ¥ 408,183 3,135,915 ¥ 130.16 $4,909 $1.57 a recurring basis at March 31, 2010 and 2011:

Yen in millions March 31, 2010 Assumed exercise of certain stock options Toyota Motor Corporation per share for the years Level 1 Level 2 Level 3 Total was not included in the computation of diluted ended March 31, 2010 and 2011 because the Assets net loss attributable to Toyota Motor Corporation options’ exercise prices were greater than the Cash equivalents ¥ 677,442 ¥ 69,702 ¥ ― ¥ 747,144 per share for the year ended March 31, 2009 average market price per common share during Time deposits ― 173,500 ― 173,500 because it had an antidilutive effect due to the the period. Marketable securities and other securities investments net loss attributable to Toyota Motor Corporation In addition to the disclosure requirements Government bonds 2,654,829 ― ― 2,654,829 for the period. under U.S.GAAP, Toyota discloses the informa- Common stocks 852,775 ― ― 852,775 Certain stock options were not included in the tion below in order to provide financial statement Other 37,296 370,933 13,134 421,363 Derivative financial instruments ― 349,556 19,437 368,993 computation of diluted net income attributable to users with valuable information. Total ¥4,222,342 ¥ 963,691 ¥ 32,571 ¥5,218,604 Liabilities Derivative financial instruments ¥ ― ¥(259,184) ¥(13,545) ¥ (272,729) Total ¥ ― ¥(259,184) ¥(13,545) ¥ (272,729)

TOYOTA ANNUAL REPORT 2011 107 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

Cash equivalents and time deposits Yen in millions Derivative financial instruments March 31, 2011 Cash equivalents include money market funds See note 20 to the consolidated financial Level 1 Level 2 Level 3 Total and other investments with original maturities of statements about derivative financial instruments. Assets three months or less. Time deposits include Toyota estimates the fair value of derivative Cash equivalents ¥ 729,569 ¥ 58,281 ¥ — ¥ 787,850 negotiable certificate of deposit with original financial instruments using industry-standard Time deposits — 120,000 — 120,000 maturities over three months. These are highly valuation models that require observable inputs Marketable securities and other securities investments liquid investments, and quoted market prices are including interest rates and foreign exchange Government bonds 3,127,170 — — 3,127,170 used to determine the fair value of these rates, and the contractual terms. The usage of Common stocks 960,229 — — 960,229 investments. these models does not require significant Other 37,842 539,109 — 576,951 judgment to be applied. In other certain cases Derivative financial instruments — 405,524 11,782 417,306 Marketable securities and other securities when market data is not available, key inputs to Total ¥4,854,810 ¥1,122,914 ¥ 11,782 ¥5,989,506 investments the fair value measurement include quotes from Liabilities Marketable securities and other securities invest- counterparties, and other market data. Toyota Derivative financial instruments ¥ — ¥ (215,283) ¥ (4,988) ¥ (220,271) ments include government bonds, common assesses the reasonableness of changes of the Total ¥ — ¥ (215,283) ¥ (4,988) ¥ (220,271) stocks and other investments. Government bonds quotes using observable market data. Toyota’s include 76% of Japanese government bonds, derivative fair value measurements consider U.S. dollars in millions and 24% of U.S. and European government assumptions about counterparty and our own March 31, 2011 bonds as of March 31, 2010, and 77% of Japanese non-performance risk, using such as credit Level 1 Level 2 Level 3 Total government bonds, and 23% of U.S. and default probabilities. Assets European government bonds as of March 31, Cash equivalents $ 8,774 $ 701 $ — $ 9,475 2011. Listed stocks on the Japanese stock Time deposits — 1,443 — 1,443 markets represent 88% and 86% of common Marketable securities and other securities investments stocks as of March 31, 2010 and 2011, respec- Government bonds 37,609 — — 37,609 tively. Toyota uses quoted market prices for Common stocks 11,548 — — 11,548 Other 455 6,484 — 6,939 identical assets to measure fair value of these Derivative financial instruments — 4,877 142 5,019 securities. “Other” includes primarily commercial Total $58,386 $13,505 $ 142 $72,033 paper. Generally, Toyota uses quoted market Liabilities prices for similar assets or quoted non-active Derivative financial instruments $ — $ (2,589) $ (60) $ (2,649) market prices for identical assets to measure fair Total $ — $ (2,589) $ (60) $ (2,649) value of these securities. As of March 31, 2010, marketable securities and other securities invest- The following is description of the assets and liabilities measured at fair value, information about the ments classified as Level 3 primarily included valuation techniques used to measure fair value, key inputs and significant assumption: retained interests in securitized financial receiv- ables, which are measured at fair value using assumptions such as interest rate, loss severity and other factors.

TOYOTA ANNUAL REPORT 2011 108 0822 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Notes to Consolidated Financial Statements

The following table summarizes the changes in Level 3 assets and liabilities measured at fair value Yen in millions on a recurring basis for the periods ended March 31, 2009, 2010 and 2011: For the year ended March 31, 2011 Marketable securities Yen in millions and other securities Derivative financial For the year ended March 31, 2009 investments instruments Total Marketable securities Balance at beginning of year ¥ 13,134 ¥ 5,892 ¥ 19,026 and other securities Derivative financial investments instruments Total Total gains (losses) Included in earnings 433 31,338 31,771 Balance at beginning of year ¥23,818 ¥ 25,499 ¥ 49,317 Included in other comprehensive income 779 — 779 Total gains (losses) Purchases, issuances and settlements (810) (8,381) (9,191) Included in earnings 586 (38,538) (37,952) Other (13,536) (22,055) (35,591) Included in other comprehensive income (loss) (1,398) — (1,398) Balance at end of year ¥ — ¥ 6,794 ¥ 6,794 Purchases, issuances and settlements (1,665) 7,026 5,361 Other (1,760) 279 (1,481) Balance at end of year ¥19,581 ¥ (5,734) ¥ 13,847 U.S. dollars in millions For the year ended March 31, 2011 Marketable securities Yen in millions and other securities Derivative financial For the year ended March 31, 2010 investments instruments Total Marketable securities Balance at beginning of year $ 158 $ 71 $ 229 and other securities Derivative financial investments instruments Total Total gains (losses) Included in earnings 5 377 382 Balance at beginning of year ¥19,581 ¥ (5,734) ¥ 13,847 Included in other comprehensive income 10 — 10 Total gains (losses) Included in earnings (641) 25,057 24,416 Purchases, issuances and settlements (10) (101) (111) Included in other comprehensive income (loss) (99) — (99) Other (163) (265) (428) Purchases, issuances and settlements (6,376) (13,582) (19,958) Balance at end of year $ — $ 82 $ 82 Other 669 151 820 Balance at end of year ¥13,134 ¥ 5,892 ¥ 19,026 In the reconciliation table above, derivative years ended March 31, 2010 and 2011, Toyota financial instruments are presented net of assets measured certain finance receivables at fair value and liabilities. The other amount primarily includes of ¥13,343 million and ¥15,893 million ($191 the impact of currency translation adjustments for million) based on the collateral value, resulting in the years ended March 31, 2009 and 2010 and loss of ¥2,485 million and gain of ¥2,083 million includes consolidated retained interests in securi- ($25 million). This fair value measurement on a tized financial receivables of ¥(13,165) million nonrecurring basis was classified as level 3. ($(158) million), certain derivative financial instru- During the year ended March 31, 2010, Toyota ments transferred into Level 2 due to be measured measured certain investment in affiliated company at observable inputs of ¥(21,413) million ($(258) at fair value of ¥119,821 million based on the million) and the impact of currency translation quoted market price resulting in impairment loss adjustments for the year ended March 31, 2011. of ¥63,575 million. This fair value measurement Certain assets and liabilities are measured at on a nonrecurring basis was classified as level 1. fair value on a nonrecurring basis. During the

TOYOTA ANNUAL REPORT 2011 109 0708 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Management’s Annual Report on Internal Control over Financial Reporting

Toyota’s management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Toyota’s internal control over financial reporting includes those policies and procedures that:

1) pertain to the maintenance of records that in reasonable detail, accurately and fairly reflect the transactions and dispositions of Toyota’s assets; 2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that Toyota’s receipts and expenditures are being made only in accordance with authorizations of Toyota’s management and directors; and 3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisi- tion, use, or disposition of Toyota’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compli- ance with the policies or procedures may deteriorate.

Toyota’s management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management concluded that Toyota’s internal control over financial reporting was effective as of March 31, 2011.

PricewaterhouseCoopers Aarata, an independent registered public accounting firm that audited the consolidated financial statements included in this report, has also audited the effectiveness of Toyota’s internal control over financial reporting as of March 31, 2011, as stated in its report included herein.

TOYOTA ANNUAL REPORT 2011 110 0719 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Toyota Jidosha Kabushiki Kaisha (“Toyota Motor Corporation”)

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements A company’s internal control over financial reporting is a process designed to provide reasonable of income, shareholders’ equity and cash flows present fairly, in all material respects, the financial position assurance regarding the reliability of financial reporting and the preparation of financial statements for of Toyota Motor Corporation and its subsidiaries at March 31, 2010 and 2011, and the results of their external purposes in accordance with generally accepted accounting principles. A company’s internal operations and their cash flows for each of the three years in the period ended March 31, 2011 in control over financial reporting includes those policies and procedures that (i) pertain to the maintenance conformity with accounting principles generally accepted in the United States of America. Also in our of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the opinion, the Company maintained, in all material respects, effective internal control over financial reporting assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to as of March 31, 2011, based on criteria established in Internal Control—Integrated Framework issued permit preparation of financial statements in accordance with generally accepted accounting principles, by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s and that receipts and expenditures of the company are being made only in accordance with authoriza- management is responsible for these financial statements, for maintaining effective internal control over tions of management and directors of the company; and (iii) provide reasonable assurance regarding financial reporting and for its assessment of the effectiveness of internal control over financial reporting, prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. that could have a material effect on the financial statements. Our responsibility is to express opinions on these financial statements and on the Company’s internal Because of its inherent limitations, internal control over financial reporting may not prevent or detect control over financial reporting based on our integrated audits. We conducted our audits in accordance misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk with the standards of the Public Company Accounting Oversight Board (United States). Those standards that controls may become inadequate because of changes in conditions, or that the degree of compli- require that we plan and perform the audits to obtain reasonable assurance about whether the financial ance with the policies or procedures may deteriorate. statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness Nagoya, Japan exists, and testing and evaluating the design and operating effectiveness of internal control based on the June 24, 2011 assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

TOYOTA ANNUAL REPORT 2011 111 0725 Business and Management and Financial Section and Message/Vision Special Feature Performance Review Corporate Information Investor Information

Investor Information (As of March 31, 2011)

Corporate Data Major Shareholders (Top 10) Ownership Breakdown

Number of Shares Held Company Name: Toyota Motor Corporation Number of Affiliates: [Consolidated Subsidiaries]511 Name [Affiliates Accounted for by the Equity Method] 56 (Thousands) Established: August 28, 1937 Japan Trustee Services Bank, Ltd. 343,704 Number of Employees: 69,125 (Consolidated: 317,716) ¥397,049 million Common Stock: Toyota Industries Corporation 215,640 Corporate Web Site: [Corporate Information] Fiscal Year-End: March 31 http://www.toyota-global.com The Master Trust Bank of Japan, Ltd. 191,724 [IR Information] Public Accounting Firm: PricewaterhouseCoopers Nippon Life Insurance Company 130,057 Aarata http://www.toyota-global.com/investors State Street Bank and Trust Company 110,672 Trust & Custody Services Bank, Ltd. 85,866

Stock Data The Bank of New York Mellon as Depositary Bank 84,184 Financial institutions, Brokerages 33.7% for Depositary Receipt Holders Number of Shares Authorized: 10,000,000,000 shares Foreign corporate entities and others 25.6% Tokio Marine & Nichido Fire Insurance Co., Ltd. 67,095 Individuals, etc. 22.7 % Number of Shares Issued: 3,447,997,492 shares Other corporate entities 18.0 % Mitsui Sumitomo Insurance Company, Limited 65,166 Number of Treasury Stock: 312,298,805 shares DENSO Corporation 58,678 Note: Individuals, etc. includes shares of Number of Shareholders: 652,568 312 million treasury stock. Number of Shares per Trading Unit: 100 shares Stock Listings: [Japan] Tokyo, Nagoya, Osaka, Fukuoka, Sapporo [Overseas] New York, London Securities Code: [Japan] 7203 Toyota’s Stock Price and Trading Volume on the Tokyo Stock Exchange

American Depositary Receipts (ADR): [Ratio] 1 ADR=2 common stocks [Symbol] TM Stock price (¥) 10,000 Transfer Agent in Japan: Mitsubishi UFJ Trust and Banking Corporation

10-11, Higashisuna, 7-chome, Koutou-ku, Tokyo 137-8081, Japan 8,000 Japan Toll-Free: (0120) 232-711 Depositary and The Bank of New York Mellon 6,000 Transfer Agent for ADR: 101 Barclay Street, New York, NY 10286, U.S.A. Tel: (866) 238-8978 U.S. Toll-Free: (888) 269-2377, (888) BNY-ADRS 4,000 [Depositary Receipts] http://www.adrbnymellon.com [Transfer Agent] http://www.bnymellon.com/shareowner 2,000 Trading volume (Million shares) 0 400 Contact Points for Investors 300 Japan Toyota City Head Office 1, Toyota-cho, Toyota City, Aichi Prefecture 471-8571, Japan 200 Tel: (0565) 28-2121 Fax: (0565) 23-5721 100 Tokyo Head Office 4-18, Koraku 1-chome, Bunkyo-ku, Tokyo 112-8701, Japan 0 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Tel: (03) 3817-7111 Fax: (03) 3817-9092 High (¥) 8,350 7,880 5,710 4,235 3,955 U.S.A. Toyota Motor North America, Inc. 601 Lexington Avenue, 49th Floor, New York, NY 10022, U.S.A. Low (¥) 5,430 4,810 2,585 3,140 2,800 Tel: (212) 223-0303 Fax: (212) 759-7670 At Year-End (¥) 7,550 4,970 3,120 3,745 3,350 U.K. Toyota Motor Europe Curzon Square, 25 Park Lane, London W1K 1RA, U.K. Tel: (020) 7290-8500 Fax: (020) 7290-8502

TOYOTA ANNUAL REPORT 2011 112 http://www.toyota-global.com